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Should you loan money to relatives?

Should you loan money to relatives?

By Cleon Wall | Posted - Oct. 4, 2010 at 5:20 a.m.



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SALT LAKE CITY -- A National Small Business Association poll says 19 percent of people used friends and family loans over the past year. But should you really loan money to a relative?

Relationship expert and KSL talk show host Matt Townsend thinks it's a bad idea. But if you do, "I would clearly treat it like a business transaction," he says.

Townsend says clarity and documentation are a must.

"I'd have a very specific plan of how they would give it back," he advises. "I would make sure the person has the character and capability to bring it back."

Townsend says many times family members trust character and not the competency to pay the money back.

"I think a lot of times in family relationships that's why we don't get the money back, because they may be incompetent and that's why they are in the financial trouble in the first place," he said.

If you don't get any promises and don't trust their ability to pay the money back, Townsend said you may as well consider the money a donation. If you don't feel comfortable donating, he said, you need to communicate that so that feelings are not hurt.

As an alternative, Townsend suggests you can lend people other things rather than money.

"I can lend you my resources, I can lend you my name, I can lend you other support," he said. "So sometimes it may better to lend your time rather than do the easy thing and just give away money."

E-mail:cwall@ksl.com

Cleon Wall

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