When close friends and family members ask for money, it is difficult to say no. Mostly so when you are caught with the request off guard. If you already know how to handle this financial situation, you might be able to deal with the request in a better way. Here are a few things you can do.

1. Medical need

For a genuine need like a medical emergency, you should give, but only an amount you could write off immediately. When you write off the amount mentally, even if the money never comes or comes after a while, your relationship with that friend or family member doesn’t get negatively impacted. Only give an amount which won’t bother you even if it is never returned. 

2. For lifestyle expenses

You should simply never lend. There are enough options out there where such expenses can be funded. Right from a credit card to personal and even lifestyle loans. Ask your friend to try those options. There’s no need for you to break your budget just to accommodate someone’s lifestyle wants. 

Use discretion. Here the decision to lend will really depend on your relationship with the asker. How much, is really your call but do look at the money habits and financial repayment capacity. Also, under no circumstance agree to stand as a loan guarantor. 

3. Home loan

Sometimes instead of seeking a lifestyle loan, your friend may require some money for a genuine need such as for the down payment for his home. What do you do in such a situation? 

Use discretion. Here the decision to lend will really depend on your relationship with the asker. How much, is really your call but do look at the money habits and financial repayment capacity. Also, under no circumstance agree to stand as a loan guarantor. 

4. For start-up seed funding

What if your friend wants to start a business or start up, and needs some seed money? Check the possibility of charging a small interest on the same and even if you decide not to charge an interest, always have a valid registered legal written agreement. Set payment schedules and take post-dated cheques. Always ask for equity in the business itself and offer money only when the person knows what he’s doing and has a solid business plan in place. 

5. Asking Habitually

Some people ask for money habitually. If you realise that one of your friends is doing the same with some other friends as well, you should be wary. There are pathological borrowers out there and they need counselling. If it’s not the case of being a pathological borrower, volunteer to spend some time with such a friend teaching and helping them to learn a thing or two about good money habits. 

6. Basic Rules

Few basic rules to follow about lending in general include not lending a fresh loan, unless you’ve recovered what you lent in the first place. Whatever the reason behind lending, you should take care that it will not put you in a tight spot.

It is important that you do not hesitate to ask for your money back after the promised duration. If you have written off the money no problems will arise, but if your liquidity is being affected then simply ask after the specific term becomes relevant, because not all remember to repay their loan in time.