What do you do when one of your family member becomes unemployed? Or suffers an unexpected injury and can't work or has insufficient insurance to cover mounting medical bills? How do you react when you know that your loved one is unable to pay his rents? Let's take a look at a few options you can consider to help your family members in Financial Problems - without affecting yourself financially or economically.
1. Help Them By Providing Them Cash
If your loved one is having a short-term cash flow problem, you may want to give an financial gift or Cash to them as a gift to them. First decide how much you can afford to give them, without putting yourself in financial jeopardy or trouble, and then either give smaller gifts on a periodic or regular basis perhaps until the situation is resolved or give the maximum amount you can afford all at once (and let your loved one know that's the case). It should be made clear that the money is a gift, not a loan to be repaid, so that you don't create an awkward situation for the gift recipient or your loved one's.
2. Make a personal loan.
Your family member may approach you and ask for a loan for a short interval of time. Talk frankly and friendly, clearly write out the terms of the loan on paper, and have both parties sign it. This helps both parties be clear on the financial arrangement they're entering into.
3. Co-sign on a bank loan.
Your loved one may be interested in obtaining a loan or line of credit (LOC) to help with short-term financial needs but what if their credit requires getting a co-signer? Would you be willing to co-sign on a bank loan?
Before simply saying "yes" and essentially lending a family member your good credit, it's important to realize that there are legal and financial implications to co-signing on a loan. The most critical thing to understand is that you are legally binding yourself to repay the loan if the other borrower fails to do the same. The lender can take legal action against you and you are said to pay the full amount by government authorities, even if you had an agreement between you and your family member that you would not have to make payments. This delinquent loan will also now affect your personal credit. So if your sister/brother/uncle fails to make payments on the loan on time and in full the lender can report the negative account activity to the credit bureaus to file on your credit report which, in turn, can lower your credit score.
Co-signing a loan is a business of great trouble which might create troubles for you too. The fact that your family members need a loan co-signer means that the lender considers them too great of a risk for the bank to take alone. If the bank isn't sure they'll repay the loan, what guarantees do you have that they will? It may also mean that you could have more difficulty getting a loan for yourself if required , since you are technically taking on this loan and its payment as well.
Before co-signing for a loan, make sure you:
> Ask for a copy of your family member's credit score, and monthly budget so you'll have an accurate picture of his or her finances and ability to repay the loan.
> Meet with the lender in person and be sure that you understand all the terms of the loan.
> Get copies of all documents related to the loan including the repayment schedule.
> Ask the lender to notify you in writing if your family member misses a payment or makes a late payment. Finding out about potential repayment problems sooner rather than later can help you take quick action and protect your own credit score.
4. Create a budget and help create a bill-paying system.
Often, people in a financial crisis simply aren't aware where their money is going. If you have experience using a budget to manage your own money, you may be able to help your family in creating and using a budget as well. To break the ice you may want to offer to show them your budget and your bill-paying system and explain to them how it helps you make financial decisions. As you work together to help them get a handle on their financial situation, the process will point out places where they can cut back on expenses or try to increase their income to better meet their financial obligations.
5. Provide employment.
If you're not comfortable making a loan or giving a cash gift, consider hiring your family member to assist with needed tasks at an agreed-upon rate. This side job may go a long way towards helping them earn the money they need to pay their bills, and help you finish up any jobs that you've been putting off. Treat the arrangement like you would any other employee - spell out clearly the work that needs to be done, the deadlines and the rate of pay. Be sure to include a provision about how you'll deal with poor or incomplete work.
6. Give non-cash financial assistance.
If you're uncomfortable or unwilling to give your family member cash, consider giving non-cash financial assistance, such as gift cards or gift certificates. You'll have more control over what your money will be used for and you can easily buy gift cards in varying amounts at most stores.
7. Prepay bills.
You may want to consider prepaying one or more regular bills your loved one receives (i.e. rent/mortgage, utility bills, insurance premiums, etc.) to help them during their current financial crunch. Offering to do something, such as paying their car payment may help them avoid a short-term crisis and give them the little extra time they need to work out of their situation.
8. Help them find professional assistance and local resources.
You simply may not wish or be able to provide your family member with financial assistance or hands-on help. But you can still play a key role by helping them find local professionals that can steer them in the right direction, such as:
> Career counselor and employment agencies
> Welfare agencies and similar services
> Credit and debt counselors
> Lenders who can provide short-term solutions
Conclusion
As always, the most important step is sitting down with your loved one and asking specifically what help they need to work their way out of their current situation. From there you'll have a better idea of the type of information and assistance they need. For example, if they need to make more money you could help them looking for jobs and update their resume. If they need help repaying credit card debt, you could call local credit counseling agencies to learn what services they offer, how much it costs and how it could benefit your family member.
Family members and money aren't always a good mix. But, in tough economic times or when faced with unexpected emergencies, your loved ones may truly need your financial assistance. Before you commit to helping, be sure to think through what you can and can't afford to do. Remember, if your own resources are limited, there are meaningful, effective, and creative ways to help your family member(s).
0 comments:
Post a Comment