Being eager to help others who are struggling financially is admirable. In many cases, however, your generosity — if it comes at little or no discretion — can attract some who don’t deserve it or who are unable to meet their repayment promises.
Although that might not discourage someone who is determined to help, it can take a financial toll if the amount borrowed is significant. It also spills trouble if your money is targeted by scammers — who are good at faking emergencies and crises to get the sympathy and financial support of others.
So before your open your wallet or pull your credit card or checkbook, this of the following points and make a conscious, informed decision whether it makes sense or not to help in this particular case.
The person
How good do you know the person? There is a huge difference between helping a sibling stuck in financial woes or someone you hardly know. If you don’t know the person that well, and even if the story this person is telling is very moving, you must explore further. In particular, you must be wary of anyone you’ve met online or through a third party. This person could be a professional scammer who is simply getting into situations that help him approach victims with sad stories and requests for money.
If you feel that the person isn’t a fake and the story is real, you still must know more about the person’s situation if you’re planning to lend money and get it back. Will this person be able to repay you? Without enough information about this person’s financial resources and other debts, you run the risk of never seeing your money again. Are you willing to take this chance?
The purpose
Related to knowing the person, you need to make sure that the story you’re hearing is true. If your entire motif is to help a person in a tough situation, you want to verify that your money is going to the right purpose. If the story doesn’t add up or seems too dramatic, it may be totally made up. Ask standards questions to find out if the person seems to be coming up with details on the spot.
One major concern is someone who is feeding a bad habit like drug addiction or substance abuse. You don’t want to be enabling this person. Or even in a less severe situation is someone who is just living off others’ money — that is a lazy person who is simply taking advantage of you.
The repayment plan
In a crisis it is easy to overlook — or feel pressured to overlook — the repayment plan. That doesn’t help you when you try to approach the person later for your money. If you start with setting clear expectations for how and when you need your money back, you will have an agreement and you will also provide the borrower with a road map for repaying you.
Based on how much money you’re lending, some of these repayment plans can be done formally through an attorney. Again, that may be awkward if you’re lending the money to a friend or a family member, but it is the only way to guarantee that you will be able to pursue your money if not repaid. In addition, a formal agreement on the repayment can help you in case of an unfortunate situation like death.
If you’re lending a small amount of money that you don’t mind if it is repaid in a week, a year or never, then it’s up to you to take a less formal approach. Having said that, watch out that you attract people who come to you during financial crises, borrow money and assume that you don’t want it back.
By Rania Oteify
