Pretty much everyone has that friend or family member who is always asking to borrow money (or maybe YOU are that friend or family member). Maybe it feels nice to be recognized as doing well enough for yourself that you can spare some cash and borrow it to someone else—I mean, people have to think that you are doing well financially in order to ask for money. And maybe you like helping people who need it! You have probably considered the risks, and what could happen if you borrow someone money. Loaning money to others can be cause tension in relationships, but it can also be very beneficial in certain situations if it is executed correctly.
If you have been on the lending-side before, you’ve probably wondered how to decide whether or not to lend money. Let’s talk about becoming a lender, and some different ways you can loan out your money. This blog post just gives a basic rundown on the types of loans that you can easily take advantage of as a lender.
Micro-loans for a good cause
If you recognize that you are fortunate financially and are interested in individuals in need, one thing to consider is micro-loans. These are great if you want to help out in a small way, but leave a big impact on someone’s life.
These are loans of small amounts of money such as $25 or $50 to someone in another country. $50 might not seem like much to you, but it can mean the purchase of a goat or the start of a business to someone else. It can literally make their life so much better with a small amount of money! The loan is paid back to you slowly with a small amount of interest over time. Not only do you earn interest (although it might not be very much), you get the satisfaction and good feeling of helping someone less fortunate than you.
Kiva.org is a great option to look into if this is something that is of interest to you!
Loans for Friends, Peers, Family
Another type of loan is those given to peers, family members or friends. You can charge interest and set up a tailored repayment plan that works for everyone. This is a great way to help someone close to you without losing money yourself. By setting out a tailored payment plan, you avoid a lot of risk, and everyone knows exactly what should happen over the course of the loan. Be as specific as you can in your custom repayment plan, because it will help pan out bumps in the road later. It can also help keep relationships in tact during the lending-borrowing process, and it can always be adapted easily- so don’t worry too much! This tailored plan can also be adapted to fit the needs of whoever you are borrowing to, and you can set certain things to cater to your needs. You also have control over how much you give, when to take payments, and how much interest to charge. Each relationship and situation is different, so this is a major perk of lending to a friend or family member, plus you get the satisfaction of knowing you are helping them out.
Venture Capital Loans
Thirdly, venture capital loans are a way to invest in a growing company in exchange for a compensation return in the form of (hopefully) growth of equity and dividends. This helps your money work for itself, while you can sit back and enjoy it.
If you are interested in learning more about loans or any other money-related topics, feel free to check us out at becomingfinancial.com!