What to Do if a Family Member Owes You Money

What to Do When A Relative Won't Pay Y'all Back

Few conversations are more awkward than approaching a family unit fellow member who hasn't repaid a personal loan. Here's how to approach this thorny issue directly withal tactfully.

Last updated: October 5, 2021

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This Money Talks serial offers tips and advice for individuals facing various sensitive fiscal conversations with loved ones.

Perhaps you're dreading it already: a family get-together where y'all know you lot'll run into the relative who owes you money and hasn't bothered to repay the loan. Perchance he or she swore to repay, only to scrap numerous times. Or maybe the borrower hasn't even bothered to mention it, almost like the loan never happened.

If y'all don't desire to make a large scene, but you tin can't just ignore the hole in your savings business relationship, what should you do?

In an platonic world, mature adults would talk rationally about a family loan, well before they reach a potential breaking point. In the real world, people renege on loan agreements all the fourth dimension, and subsequent financial conversations tin devolve into arguments and misunderstandings. The issue is hurt feelings, regrets over fiscal decisions or situations where people either fumble for the right words to ask for money or silently fume.

If you're faced with the situation of dealing with a family member who won't pay back your loan, the all-time approach is to handle the affair in a direct, tactful and gracious way.

How to ask for money from family

To broach the matter of a family member who won't pay back your loan, discreetly pull the person who borrowed the coin to a tranquility identify, and simply tell him or her that you'd like to discuss a realistic loan repayment schedule.

Jim Heitman, a certified financial planner and the owner of Compass Financial Planning, says your approach to asking for money to be paid back should be amicable and straightforward, not hostile or accusatory.

Discuss family loan in-person

Choice the right time to accost the loan. Don't bring up the fact that a family fellow member won't pay back your loan over Thanksgiving turkey or equally everyone is opening holiday gifts.

Heighten the issue in private with only the private in question, not among a roomful of family and friends enjoying a holiday football game game on TV.

If it was a big loan, to increase the likelihood of repayment, advise that the borrower pay you lot back in installments instead of a lump sum. Merely for smaller amounts, a lump-sum repayment is the best way to quickly and cleanly deal with the situation and put the loan backside you both.

Avert loan repayment drama

Don't lecture the person or assume to know the borrower's complete economic circumstances or spending habits, advises Heitman. Inflammatory comments tin but serve to escalate an already tense or uncomfortable situation.

Many adults who have borrowed money from relatives already feel bad nigh having to seek financial assistance from family unit members. So don't compound their guilt and don't complicate broader family relationships past threatening to divulge their delinquency to other relatives. Such tactics may backfire, leaving you with more than the loss of just money.

An alternative approach to collecting a family unit debt

Some other manner to handle this tricky situation, Heitman suggests, is to not have a verbal conversation about the overdue loan at all. Instead, try slipping the person a politely-worded but directly notation, which may have more impact.

How to inquire for money from family unit in a annotation?

Heitman recommends something to this effect: "I don't know all the details of your financial situation. But I do know my own economic situation, and I'1000 at a point where I could really use that money I loaned you, or at least some portion of it. And then if you can repay information technology onetime presently, that would exist great."

The key is to keep the note cursory, respectful and thing-of-fact.

If the person doesn't answer favorably, or doesn't at to the lowest degree propose a repayment plan, "ultimately, you may be forced to brand a decision about what is more of import to you: the human relationship with your family member or getting paid dorsum," Heitman says.

Earlier making a family loan

Some of the anguish over a soured family loan might be avoided, Heitman notes, by setting your expectations upfront.

"One of my first rules for my clients is: 'Presume when you loan money to family unit that yous will never see it once again,'" says Heitman.

Heitman says it's not that all relatives are irresponsible or callous toward family loans. Just there's simply as well many private variables that may brand repayment of a personal loan highly hundred-to-one.

Don't let family coin issues fester

While yous want to exercise discretion, don't feel that you accept to keep quiet about the thing in the name of keeping the peace.

Chris Smith, a personal finance skillful and author of, "Securing Your Financial Hereafter," says that "fifty-fifty though the main purpose of having relatives assemble over the holidays is to renew and refresh family ties, there'due south a real benefit to having money conversations as well."

Even for sensitive topics, Smith says, "I'm a stiff advocate of having those kinds of conversations every time you take a chance."

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Source: https://www.moneyrates.com/savings/what-to-do-when-a-relative-hasnt-paid-you-back.htm