Loaning Cash to Family and Friends- Prevent Soft Loans from Ruining Relationships

Loaning cash to family and friends is nothing out of the ordinary. At one time or another, some of us may find ourselves considering extending a helping hand to a friend or relative who is in trouble financially. Before you do this, there are a few things to bear in mind.

What purpose will the money be used for?
If the money is to be used in a business venture, ask your friend or relative what kind of plan they have for making a profit from the business. You will have a better idea of just how much planning they have been doing. You will also know how to better help them, if the plan is sound. Ask what the money will be used for.

What is the person’s financial history?
Is the person borrowing money because they are genuinely going through hard times, or are they less careful with money than you would prefer? Someone who is very responsible in one area of life may not be as adept in another. Know where the person’s strengths and weaknesses are, so you know what to expect from them. Let the person know what your expectations are of them with respect to the loan.

Is this money that you are considering lending, money you can afford to lose?
No matter how faithfully your friend or relative promises to pay back the money, bear in mind that their expectations of the future might not bear fruit as they would want. Sometimes this is through no fault of theirs. Things can just go wrong.

If the unexpected happens, can you afford to lose this money? Will you still be able to maintain a positive relationship with this person? Don’t lend more than you can afford to lose.

When will the person pay back the loan?
Asking this is very important. For one, it reminds the relative or friend that you do expect the money to be repaid. Secondly, if the friend or relative has no immediate answer, it may be an indication that they hadn’t thought about it.

There’s a reason why some people advise against lending money to friends; it can break the friendship. However, it is hard to see a friend in need and not assist. Get the individual to sign a personal loan contract. Make sure you do what is necessary to protect yourself if you decide to help your friend.

Stop, Avoid or Get Out of Foreclosure and Keep Your Home

You can stop, avoid or get out of foreclosure and stay in your home. Your house is one of your most valuable assets and you have probably already spent a lot of money paying for it.

Some people say that if you are still paying a mortgage, your home shouldn’t be your biggest asset. The remaining debt puts you into a position that is unstable, as many people find out after missing a few mortgage payments.

Lower the Chances of Foreclosure By Getting a Cheaper Home from the Beginning
If you have not yet bought a house, make sure that when you do, you try to shop for a mortgage that is 20% less than what you can afford. Look at your budget and decide. This is because mortgage companies have the tendency to raise rates and when they do, that raises your monthly payment.

If you were already struggling to make the previous payment, it’s going to be hard to make an increased payment. Houses are very expensive, so it’s not always possible to do this but if you have a choice, spend below what you can afford.

What to Do if Your Mortgage Company is Applying Pressure
Many mortgage companies are quick to foreclose on accounts that are even a month behind. If you already have a home and cannot afford the mortgage payments for a period but you don’t want to lose your home, what can you do?

Get a Short Term Loan to Cover the Outstanding Mortgage
If your credit is good otherwise, you may consider getting a short term loan from a financial institution to cover the outstanding balance.
You can get these from:

1. A reputable bank 
2. A peer-to-peer lending service
3. If you are a member of a credit union, this may be the best place for you to get a loan.
4. Some companies also offer their employees loans at reasonable interest rates.

Talk to Your Mortgage Officer and Work out New Terms
These are only short term solutions though and if you notice that your situation is spiraling out of hand, you may need to talk to your bank about loan modification, or seek advice from a non-profit debt counseling agency or another person who will offer genuine advice and not just take your money.
The faster you do this, the better. Time is not on your side when it comes to situations like this but a decision made too hastily won’t profit you either.

Peer To Peer Lending: A New Financial Solution To Consider

Peer to peer lending is a process that allows folks to borrow from an individual investor or a group of them, instead of the bank or a credit union, so they could get back on their feet. It was primarily established due to the benefits it presented to the lenders, which included high returns for investments and the ability to guarantee them - something they cannot achieve when they gamble on the stock market. And it is fortunate that it also affects borrowers in a positive way.

Everyone can relate to how difficult it usually is to get financial backing from an established institution, whether or not you have an outstanding credit rating. The economy is still recovering from 2007 recession. And most creditors are strict about whom they give money to. Also called P2P, peer to peer lending helps simplify the process of getting the needed funds and allows people to exercise a little bit of freedom when it comes to deciding what the payment conditions are.

One of the great features of P2P lending is that it typically comes with a lower interest rate. As such, it is more manageable to pay off. And you face fewer risks to face when it comes to honoring your obligations. Banks and large lenders usually have to run a business and that encompasses more than a loan portfolio. If they took a lenient stance against borrowers, they would eventually run out of capital to finance their own operations. This isn't a problem small creditors have, which is why they can afford smaller interests and longer payment terms.

As far as the qualification goes, P2P will still require some screening. But it will not be as rigorous and selective as alternative resources. And above all, credibility and association can be considered for the approval of a loan. It is unfortunate that a lot of good people today fall into hard times and they end up withheld of the privilege to start over because they are not safe investments. When you think about it, no bank will ever consider lending a substantial amount of money to a teacher who just got laid off to help her keep her house or start a treatment for his illness. For them, if there is a huge possibility that a person may not be able to meet his obligations, the request will be declined and he can move on to his next option. However, with P2P, individuals stuck in these situations will have a fair shot at getting financial assistance during emergencies and not have to deal with threatening consequences.

Beyond the given example, it is interesting to note that peer to peer lending is actually popular among entrepreneurs given that they are able to finance small projects and expand their business with minimal restrictions,. Banks don't necessarily approve a loan unless they know what the business is spending it for, how they intend to go about it and how much would it affect their productivity and profits. P2P does not demand too much out of an applicant, although credit score and history reports may still apply.

For more information about peer to peer lending visit our website http://www.debtconsolidation.com

Article Source: http://EzineArticles.com/?expert=Cedric_P_Loiselle

You may also like:

Lending Money to Friends: Should You Do It?

Bad Credit Loans: How to Get a Loan with Bad Credit

Why Investors Use Financial Due Diligence Checklists

Living on a Budget

Credit Card Statement

A credit card statement can give a lot of information.
It shows what your interests are. It gives information about what is important to you-what you like to spend on. It tells prospective lenders how you handle money.
If you are not responsible with making payments on time, this pattern will show up on your statements.

Remember that a credit card is credit. It is a loan. Therefore, your use of the credit card will show how responsible you are in handling credit.

You may also like this article:
Bad Credit Loans: How to Get a Loan with Bad Credit