5 Reasons why you should not Give Small Loans to Friends and Family

Just about anyone who is in a position to do so looks forward to the time when they can help their loved ones. Friends who may need small loans to get back on their feet find welcoming support in getting those loans. Family members who are in a financial bind receive the small loans they may need to get out of the situation. As good as it feels to help out when someone is in need; there are five important reasons why you should not give these small loans to friends and family:

1. If the loan is not repaid, the relationship can be negatively affected

One of the biggest reasons the relationships between friends and family become negative is over money matters. When you make small loans to loved ones, there is a possibility they might not pay you back. This may result in your feeling as if the borrower does not respect you or your feelings. You may become resentful towards that person and stop interacting with him or her. Even if the rift in the relationship is caused by something other than the loan itself, repayment of the loan can still be affected. The borrower may never pay the loan back because of some other slight in the relationship.

2. One small loan can turn into several small loans

Small amounts add up more quickly than you can imagine. One small loan to one person can turn into several small loans to different people. It is easy to quickly find yourself overextended on the amount of money you have loaned out to others. The sum of these loans may exceed the amount you can afford to have out at the same time.

3. You may need the money yourself

Unexpected expenses come up for just about everyone at some point, and your emergency may come just when you have made small loans to loved ones. If you need the money yourself, you may have a difficult time getting it back from the borrowers, especially if the terms you agreed to have not been fulfilled. You should never lend out more money than you can afford to lose if the borrower does not pay it back, even in emergency circumstances.

4. Lending to someone else does not mean they will also lend to you

Most people do not make small loans just so they have a lending source if they ever need it, but it is hard not to imagine that the same people you help would not help you if you needed it. This might be just the case in some instances, and finding yourself in need of a loan and not being able to get the money from even those you have previously made loans to can place a negative cast to any relationship.

5. Rescuing people may make them dependent

If you are quick to make loans when they are requested, your loved ones may become dependent on you to rescue them financially and in other ways whenever they want you to. Sometimes it is better to allow people to find solutions to their problems on their own.

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