Should You Help A Relative

Due to the recession many Americans have exhausted all formal resources to borrow money and are looking to relatives for a bailout. Some relatives are able to help out my loaning money to needy families. The probability of a relative being able to pay back the money they borrowed from you is a lot lower than the probability that they will ask you for money again so decide if you want to be their personal bank or if you want to make them stand on their own two feet.

Here are some questions to consider before loaning money to a relative:
1. Decide if it will be a loan or a gift
2. Will you charge interest?
3. What are the consequences if they don't pay the money back?
4. Will the loan you give put your relative in a financial bid?
5. Is the loan for a legitimate reason?

Here are 11 tips when loaning money to relatives.

1. Keep your head above water. Don't go further into debt to help a relative, not even your mother. If you go into debt and lose your job, your mother can no longer get help and may are jobless and in mounds of debt with no one to help you

2. Ration out help. You can occasionally help relatives for emergency purposes but don't make it a habit because you will only hinder them instead of help them. Give a man a fish and he eats for a day, teach a man to fish and he eats for a lifetime.

3. Give advice. Give advice on how you got out of a financial crisis and become financially stable. Encourage them to develop better spending habits or seeking professional help.

4. Don't be a sucker. Don't fall for the tears, sobs and emotional pleas for help for relatives who do not manage their money wisely.

5. Ask for the address. If a relative asks for money to pay a bill and you want to help, ask them to give you the bill and you can send the money to pay the bill. If they refuse, they you know they wanted the money for something frivolous and didn't really need help.

6. Agree with your spouse. Work with your spouse to discuss the situation. If it is her family, then be sensitive to her needs. Take a stand. If your spouse advises you not to help a his/her relative listen to your spouse. They know their relatives better than you do.

7. Don't co-sign for relatives. You can’t control how other people spend their money. If they don't pay the bill, you are responsible for the debt and risk the chance of ruining your credit.

8. Direct them to social programs. Tell your relatives to seek help from their local church, American Red Cross. Visit www.bailafamilyout.com.

9. Assume you won't get the money back. Always assume that you won't get the money back. If makes it easier to loan the money.

10. Draw up a loan agreement. You can have your relatives sign a contract if you want to feel better about ensuring you will get your money back.

11. Consider other relatives. If you loan money to a relative and your other relatives find out they will want a loan too, be prepared to deal with the backlash if you don't lend money to all your relatives who ask for a loan.