A loan to a friend or family member sometimes results in the loss of both the money and the relationship. In fact it can result in unexpected set of problems. Here are some tips that can help you, if you do agree to loan money.

Loans to family and friends tend to be open-ended. The parties don’t reach an agreement for a time-line for repayments, and don’t include interest on the loan. Lenders must agree on a time-line and schedule for repayment. A final deadline as well as monthly or quarterly repayment. For example, “Brother, I’m happy to lend this money to you, but I’ll need the money repaid by December 31st. If you can pay me Rs. 10,000 every month, the loan will be paid off by the end of December.” Set a deadline for repayment in agreement with your friend/relative so that he takes loan payment seriously and with motivation to avoid any misunderstandings.

It’s difficult to ask for the money back! It can make family gatherings awkward. Therefore, you may agree on privateness of the loan. Loan should also not make borrower a servant to the lender. If you think the borrower feels subjugated, try to help ease his or her discomfort.

Another concern is that borrower may ask for more. You should never be in a state of constant lending. When you lend money to friends or family members, you give them an easy way out of their financial problems, instead of helping them work through their issues.

Loaning money to friends and family costs you money. Most likely, you won’t charge interest if you give a loan to a loved one. You should also keep in mind that you may also need money for emergency fund. What if you suddenly need money. Not receiving repayment of the loan in a timely manner might spell disaster for you and your family. If you are yourself in sort of personal financial down-swing, don’t lend money to family members or friends. Tell them honestly that you have a tenuous financial situation, and can’t spare the money.

As Shakespeare wrote, “For loan often loses both itself and friend.” If you lend money to a friend or family member, beware that you may not get your money back and your relationship may never go back to normal. This will cause tension between you and the borrower, and may also cause guilt, remorse and anger.