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4 tips to get paid back for a personal loan to friends or family

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“Neither a borrower nor a lender be,” Shakespeare wrote. “For loan oft loses both itself and friend.” If you have loaned money to a friend or family member, you likely understand the sentiment.

A November 2021 Bankrate study found that 69 percent of U.S. adults had loaned money to friends or family. Of those that had offered financial help, nearly half had experienced a poor result (like losing the money or causing damage to the relationship).

When you loan money to friends or family members, ensuring repayment can be difficult. Lenders often feel awkward asking their friends or relatives to pay up, and borrowers may be embarrassed for their slow repayment of personal loans.

Tips to get paid back for loans to family

If you find yourself in a situation where you are considering lending money to a friend or family member, it’s important to get yourself in the right place before you make the loan. If you have the financial ability, you might consider making it a gift instead. If you do end up losing a family member or friend money, here are a few tips to increase your odds of being paid back.

Be direct

Being direct applies both to your communication before you make the loan and how you treat things while waiting to be paid back. If a family member or friend asks you for money, consider writing down an agreement for how and when the money will be paid back. It may not be something that is legally enforceable, but it does two things. First, it makes the arrangement more formal, which should increase the odds that the borrower will take it seriously. And it also makes sure that you are both on the same page for the details of paying the loan back.

It’s also a good idea to be direct with your communication during the payback period. This is where having a written document to refer to can be helpful. Try not to be passive-aggressive or make snide comments if you see your friend with a new phone or other spending you find “frivolous”. Just be direct with your expectations.

Don’t let too much time pass

One mistake that many people who lend to friends or family make is to let too much time pass without mentioning the loan. While you don’t want to be constantly harassing your friend for repayment, you also don’t want to just forget about it. That’s another reason to set a straightforward repayment plan agreed upon upfront.

The more time that passes with the borrower not paying, the more embarrassed they might feel. That can lead to awkward feelings, or them trying to avoid you, which may cause even more awkwardness. That’s why it’s best to be clear with expectations upfront about a realistic repayment schedule.

Be empathetic and avoid taking things personally

Mixing money and friends is fraught with peril, and another tip for trying to keep them separate is to treat it like a business transaction. If you were running a business, would you lend to this person? If not, then that could be a good indicator that you should tread with caution. Suggest alternatives like credit cards, savings or personal loans.

If you’ve lended money to someone and they are having trouble finding the means to pay you back, be understanding that their financial situation involves many factors, not just their relationship with you.

Suggest a payment plan

Returning once again to the idea of setting up and both agreeing to the terms of the loan in advance, it’s a good idea to have a written payment plan. Is the money going to be repaid immediately once they have any spare cash (like on the next payday)? Or are the payments going to be spread out over the next few weeks or months.

Making sure both of you are in alignment can spare hurt feelings when you see them going out to eat or with a new iPhone while you’re packing your lunch to save money.

Having a written agreement in place doesn’t just provide borrowers with a path to repayment of personal loans — it also gives the lender legal footing in some cases. If the amount is something you must have back, a payment plan in writing may give you the opportunity to pursue the funds more formally.

Barter

If you’ve tried other ideas, and you’re still having trouble getting repaid, it may be time to consider alternative forms of payment. Bartering can be one solution, depending on your relationship and their skills.

One idea might be to have them watch your kids while you go on a date with your spouse. Or perhaps they have particular tools or skills that you can use in exchange for writing off the debt. Bartering can be a middle-of-the-road solution that lets you put the debt behind you and restore the relationship.

Let them pay for you in other things

Along the same lines as bartering, you might consider being repaid in other (non-cash) items. It can get a little bit tricky since you would have to both agree on something to be used as payment and agree on the value of that item. However, if your friend or family member is still having cash flow problems and isn’t able to repay you, it may be something to consider.

You’ll want to be careful about how you suggest this because it could be damaging to your relationship (not to mention tacky) if they feel like you’re trying to take advantage of them. It might look weird if you’re wearing an outfit that used to be theirs at the next family get-together.

If you do decide to go down this road, it would be best to approach it open-ended — ask them if they have anything they’re looking to get rid of that might make sense in lieu of repayment of the debt. That lets them be in control of what they might be willing to part with while also reminding them that the repayment is still outstanding. If you occasionally go out for a meal or for drinks, see if they would like to pay your tab.

Let it go

If all else fails, you may have to decide between your friendship and the money that you lent. If all of your other ideas have failed and you’re still out the money, you may end up deciding that it’s no longer worth pursuing.

Sometimes giving up on trying to get paid back will be the best thing for the relationship and your overall mental health. Depending on the specifics of your situation, you can decide to actively let your friend or family member know that you’re not going to try and collect any more or just passively let it go.

Bottom line

When you loan money to friends or family members, ensuring repayment can be difficult. Lenders often feel awkward asking their friends or relatives to pay up, and borrowers may be embarrassed for their slow repayment of personal loans. Agreeing on repayment timing and strategy upfront can be a good way to minimize hurt feelings. You might also suggest that they take out a personal loan and remember and looking at the best personal loan rates they can qualify for.

Written by
Dan Miller
Points and Miles Expert Contributor
Dan Miller is a former contributing writer for Bankrate. Dan covered loans, home equity and debt management in his work.
Edited by
Loans Editor, Former Insurance Editor