A Balanced Approach On How To Successfully Execute A Loan Agreement

11/05/12 6:18 PM

Welcome borrower!

LendingKarma has helped with over $100,000,000 in loans, and as a result, we’ve compiled some helpful insights from both our observations as well as customer feedback.

If you happen to be a lender, it may be wise to send this series to your borrower just as friendly advice.

The Enlightened Borrower’s Loan Agreement Series:

Part 1)   4 Things To Consider Before Asking For A Loan
Part 2)   How To Ask For A Loan
Part 3)   How To Structure A Loan To Protect Your Relationship

 

Part 1:  4 Things To Consider Before Asking For A Loan

Take the following 4 tips into consideration before asking for a loan:

Assess the Individual:

  • Will your offer be received positively by this individual?
  • Take the time to examine the person who you are considering to borrow money from. Here are some of the desirable characteristics we suggest to look for in the ideal lender: patience, flexibility, easy to reach, and understanding of your situation.

Assess Yourself:

  • Is it realistic for you to borrow the desired amount of money and responsibly pay it back to the lender in a timely manner?”

Assess the Relationship:

  • Do you have a history of unresolved arguments or sour confrontations with this individual?
  • Loan agreements can be an extremely delicate subject matter so, make sure you choose someone who you have worked with successfully in the past or someone you can see yourself successfully working with in the future. If any unexpected ‘speed bumps’ occur, you want your lender to be calm, flexible, and able to collaborate with you to sort out a realistic solution.

Example: “I borrowed money from my neighbor to pay for a car. I chose my neighbor because he has known me since I was young and completely understands my financial situation. I was prompt with all my monthly payments until I ended up injuring myself playing basketball at the park. The incident required a hospital visit and left me with a hefty hospital bill. I was unable to make payments to my neighbor that month. Fortunately, my neighbor was very understanding and flexible. Together, we created a new loan schedule which delayed repayment so, I  had time to get back on my feet.”

Seek Opinions:

  • Do not be afraid to ask for outside opinions on a potential lender. Outsiders can provide valuable information about an individual and offer a different perspective. Maybe, someone you know already had a good/bad experience with this individual about money. It never hurts to ask.

Example: “I was thinking about asking my Aunt for money. She seemed like the ideal lender because she was quite wealthy and I had a cordial relationship with her. I sought my mom’s input, and she revealed to me unpleasant stories about my Aunt’s financial situation. She affirmed her wealth but also brought up her trials and tribulations with gambling and inter-family drama dealing with money. I realized she was a risky source so, I decided it would be best to search for a different lender.”

Overall, use your judgement and do not be too anxious to finalize any decisions. Do some research on the individual before you ask for the loan. It is also smart to take the time to assess yourself, your ability to pay off loans, and your ability to handle delicate money situations.

Best of luck!

Knowing others is intelligence; knowing yourself is true wisdom. Mastering others is strength; mastering yourself is true power. -Tao Te Ching

check out part 2: How To Ask For A Loan

 

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