Home 4 Tips to Consider when giving Private Mortgage

4 Tips to Consider when giving Private Mortgage

 

Every one of us face the situation at least once in life when a friend or a family member asks to lend them money mostly for home or some urgent need. By principle, it is the worst decision you can ever make if you do agree to lend money to a loved one. It simply leads to rift between relationships, not to mention the awkwardness that comes with having to refuse such a request. However, it could also be hard to ignore the plea for help when you see a friend suffering especially if you have the means to help them.

You need to know when you lend someone money without collateral it falls under the category of private mortgages which is also known as unsecured loan. Here you get the opportunity to outline all the terms and conditions like when you expect return, interest rate, what happens when not on time delivery. So you need to secure yourself every possible way.

So, if you have made the decision to lend money to a friend, here are some tips to consider.

Get all the Details

Before you lend the money, it is common sense to know exactly where your money is going. Ask your friend where they intend to spend the money and decide whether the purpose is worth lending the money or not. If the borrower becomes offended or refuse to give you the details, take it as a red flag and do not give out the loan.

Do not cosign anything

If you are willing to help your friend in need, it is best if you stick to cash only. Dealing with cash means it does not impact on your financial status directly, such as your credit history. However, if you cosign a home loan or a personal loan for a friend and he or she fails to pay it back on time, not only will you face legal consequences but it will also reflect badly on your credit score, not to mention that it can jeopardize your chances of getting financial help in the future.

Set a Reasonable Interest Rate

Lending and borrowing money between family and friends usually does not require interest rates however, if you want make sure you get your money back, it is important that you set a reasonable interest rate. If you are lending a huge amount of money you have doubts the borrower will be able to pay back, then all the more reason to charge interest.

Put it in Writing

You never know what the future holds for everyone, your friend may not be able to repay the debt and you should be ready to deal with it. It is essential that you discuss every term and condition with your friend and put it in writing. Signing an official document will finalize things and also provide you a sense of security.

If you don’t follow the above mentioned tips then your money could drown and there will be nothing to do about it.

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