When you find yourself waiting for money that your friends or your family members owe you, it can be more than a bit awkward. People in need often turn to their closest friends or relatives to lend them money. It is entirely reasonable, and it is a common practice all over the world. Yes, it does take a person much courage to approach a person for a loan, but that does not mean you have to agree to the proposal. Take time to think about the possible repercussions before you give them the money. Most importantly, think about the ways it can impact your relationship in the long run.
However, in most cases, there is a lack of written record or a proper repayment structure, which gets many lenders in trouble later on. You can find yourself in dire need of cash after a couple of months with no other option but to ask that friend or family member for your money back. That is where the real trip begins. According to the Federal Reserve Board Survey of Consumer Finances, people lend about $89 billion to close friends and family. It opens the possibility of ruining relationships in the long run. Especially if there is a lack of proper documentation and payment term, the situation can become a lot worse.
What is the real reason the person is not paying?
First, you need to think about your relationship dynamics with that person. If that person has broken their repayment promise, you need to start thinking like a lender and not as a dear friend. Find out why the person has failed to make the payment. If he is not in an unfortunate financial situation, you need to explore the possibility that he might be taking you for a ride.
Anger and aggression is not the way. You need to stay calm and be persistent. If necessary, make one phone call per day and remind him of the money he owes you. Drop by his workplace or his home, but do not be threatening. It is okay to feel angry, but you should not let that drive your actions.
In another scenario, your debtor might be in a messy financial situation right now. Here, the same tactic is not welcome or recommended. Pressurizing them for paying you back while they are struggling with their personal finances is never a good idea. Instead, you can introduce them to websites like NationalDebtRelief.com. Portals like these have several posts and articles on debt refinancing, debt settlement, and credit counseling. These can benefit your debtor in a plethora of ways. They should be able to manage their outstanding debts better, and this should help them to pay you back on time.
Get repayment promises and deadlines in writing
It might not be too late to turn to proper documentation. You may have missed the opportunity to put things down on paper when you were lending the money. Nonetheless, you can ask them to sign agreements on repayment terms and deadlines right now. You can approach them with a sense of urgency, cite an immediate need for the fund and always ask them to sign the papers.
You will almost always find it easier to ask them to pay about 10% of the amount on a particular date each month. Always remember to be firm, but never threatening. While this will still convey the fact that you are serious about repayment, it will also provide a paper trail of the transaction.
Write them a letter; mail it to their home/workplace
Mailing a letter home or to their workplace works like a charm. Compulsive borrowers and defaulters often do not inform their families about their habits. Sending a letter to their home address is a subtle threat that they are bound to notice. It is the same for their workplace address. Many offices have strict policies about employee codes against gambling, debt, and financial fiascos.
Do not indulge in a fuzzy talk in the letter. Keep the message short and to-the-point. Stick to facts and give them a 7-day deadline to respond to the letter. Send this as a certified letter.
Get help from your lawyer
If your friend is taking you for a ride, seek advice from your lawyer to write them a letter. It should be impersonal and non-threatening. It should state the outcomes of non-payment quite clearly. At this point, your friend or the family member has overstepped their bounds, and you have the complete right to treat them as a non-paying borrower.
Take them to court
Let us hope that it never comes to this. However, in case of constant dismissal of your warnings and letters, you should consider taking them to court. Try to keep this process short since the cost of hiring the attorney and the entire lawsuit should be less than 50% of the money you get. You can file a small claim, and that should be the rude awakening your creditor needs. Going to small claims court is especially useful in getting money back from business owners.
There is a high chance that they will pay after seeing your dedication and intention to take them to court. Just in case they do not pay attention even now, you can seek help from a collection agency. They work pretty well since they have verified methods of extracting money from compulsive non-payers.
The next time a close friend or a relative comes to ask for money, you can start by sharing your own money woes. Instead, share your amazing experience of money lending platforms or Peer to Peer lenders with them. If you cannot do that, at least take two days time and chalk out proper legal papers that can serve as a proof of the amount they owe you. Lending money to people in need is not a harmful practice as long as you know how to get the money back from them.