Lending Money to a family member.

Shakespeare wrote that loaning money to a friend is a good way to lose both friend and money. So what do you do when a relative hits you up for a quick cash infusion? Tread carefully.
Often, the First Bank of Dad (or Mom) is the first place people turn when they have financial trouble, and many do have a need. A recent survey by Fidelity Investments found that 41 percent of U.S. households did not have emergency funds sufficient to cover three to six months of living expenses.
The first choice for cash during an economic catastrophe? Family and friends.
So if Uncle Bob puts the bite on you at the next family barbecue, here are some things to consider:
• Do you really have the money? "It's the same rule as gambling: Don't loan what you can't afford to lose," says Ira Bryck, director of the University of Massachusetts Family Business Center in Amherst. Even if you're driving a Mercedes and living in a good neighborhood, if you haven't got ready cash lying around, a loan might not be feasible.
• What's the money for? Are you loaning your daughter $500 to put groceries on the table while your son-in-law is out of a job? Or does Cousin Ed want $15,000 to start a mink farm? And if you're loaning money for a small business, is the venture stable enough that you're comfortable with the risk?
• Is the borrower likely to repay you? Look at the person's past behavior. If someone consistently borrows money and never pays it back, chances are he has no intention of repaying you.
• Could the loan cause a rift in the family? This comes up a lot with siblings who borrow from parents, says Bryck. The one who doesn't get the loan thinks the parents are playing favorites. Or the siblings accuse the borrower of draining the inheritance. Bottom line: If you're the lender, it's your money to spend. But be discreet if you want peace in the family.
• How much will the loan cost you, and is it going toward something that you value? If your nest egg earns 7 percent annually, and a family member wants to sideline $20,000 for five years, the real cost is $28,052. But you might feel it's a smart move if the cash helps Dad hang on to the house or enables your nephew to finish medical school.
• Does the relative have other options? If the kids are in the habit of going to the Bank of Dad because the rates are so good, it might be time to introduce them to your local loan officer or credit union. Conversely, if their credit is so poor that they can't qualify, you need to know why.
• Can you easily live without the money for the term of the loan? What will you have to do without if you give up the money? Even if you're "only" taking it from savings, will the loan rob you of a much-needed cushion if you're the next one in the unemployment line?

New payment reminder service

Keep loan payments on track, month to month, year to year. One 2 One Lending will send e mail reminders to the borrower on the lenders behalf to make sure that all parties are aware that the periodic loan payments are due on time.

Is it OK to ask someone to sign a promissory note?

The most important reason for asking for a promissory note is to preserve the relationship – not to test it. I you are uncomfortable asking for a note to be signed – imagine how uncomfortable you will be if you need to discuss a sensitive matter about the loan in the future, say a missed payment or a misunderstanding about the rate.
It is not wrong to ask for documentation between family and friends. In many ways it not only benefits the borrower and lender but also other family members who many have incorrect assumptions about the loan.
Disagreements are much less likely when the loan is in writing.

Welcome to the One 2 One Lending Blog

One 2 One Lending provides the tools to create a schedule of loan payments,
prepare a promissory note, bill and collect loan payments with set up email reminders as well as and take security for the loan, should the customer desire.

The interactive website (www.one2onelending.com) allows the customer to stay in
charge of the loan preparation and servicing by providing the proper tools and
information to build and collect the loan.