Tips for Living On Less – When You Do Give a Friend a Loan
Get it in Writting
If you are asked by a family member or friend for a loan you should feel free to point them to an organisation that does such things every day and can easily afford it. If for some reason you decide that you can handle the amount and repayment time that your friend or family member is looking for a loan then you should take a very important step in case things do not run as smoothly as you hope (when do they ever?).
Protect Yourself & Your Relationships
If lending money to a friend or even family then be sure to get the arrangement down in writing and ask two friends to sign as witnesses. This helps everyone remember the repayment arrangement exactly without any confusion. Then give your friend or family member a copy of the original document.
It is not uncommon for confusion to set in when time goes by and one party is unable to stick to a verbal agreement. Having two witnesses who are aware of the arrangement can also help encourage the other party to remember things correctly even if they lose their copy of the written agreement.
It may sound a bit formal and like you do not trust the other party but it give both sides clear guidelines and this will reduce any future fall out if the borrower cannot repay as planned. In such a case you could even include a clause about them going to a formal credit provider (who is registered with the NCR) to get the funds required to settle the debt with you.
Becoming a Credit Provider
Remember that this type of lending as a favour is for very close friends and family. If you begin to lend to other people and charge fees or interest then you need to register with the NCR as a credit provider. The National Credit Act & regulations require you to do so and it is illegal not to. You can find out more at www.ncr.org.za