Over 10 years we help companies reach their financial and branding goals. Maxbizz is a values-driven consulting agency dedicated.




411 University St, Seattle


8 tough questions to ask before lending money to family or friends – Morningstar

By Lazetta Rainey Braxton
Fear, obligation and guilt can cloud your judgment when someone asks for a loan. Your role as a lender requires you to be comfortable asking pertinent questions.
This article is reprinted by permission from NextAvenue.org.
In these tight times marked by high inflation and a debated recession, many households feel cash-strapped and squeezed by escalating expenses and interest rates. The first line of defense for many of them involves asking family and friends for money to stay afloat.
As a financial planner, I have witnessed many of my fellow first-generation wealth builders and sandwich-generation wealth protectors face the precarious decision of whether or not to lend money to family members and friends.
Money F.O.G. (fear, obligation and guilt) and pulled heartstrings cloud their judgment as they contemplate the lending decision. They toggle from wanting to lend money and get loved ones back on their feet to having difficulty trusting someone already in debt.
Don’t miss: My girlfriend and I sold our Florida home. Our $200,000 profit was wired to her account. She refuses to give me my fair share. What’s my next move?
Consider this before lending money
If you’re considering lending to a family member or friend, here are some questions you should ask yourself before making that leap:
Shakespeare opined on keeping drama out of the relationship equation by declaring: "Neither a borrower nor a lender be for loan oft loses both itself and friend."
Also see:My friend cleans, cooks and cares for my child. I pay her $50 a day. Am I taking advantage of her?
Questions to ask a borrower
At the same time, you should be prepared to ask important questions of the prospective borrower. Money conversations are challenging even for the most secure relationships, and your new role as a lender requires you to be comfortable asking pertinent questions such as:
If you don’t feel comfortable asking the questions or the prospective borrower balks at providing answers, you both may realize that a loan from you is out of the question.
Also see: Am I a fool for keeping my IRA invested in stocks?
Always get it in writing
If you decide to assume the role of lender after answering the essential questions above, consider codifying your agreement. Establish a legally binding promissory note to include terms such as the total amount borrowed, interest rate, repayment schedule, past-due payment fees and default terms.
Add the loan to your list of assets on your net worth statement and add language in your will or trust to ensure your estate will collect on your investment upon your death. To assist with its legality, determine whether your employer offers a legal benefit service or secure online resources such as RocketLawyer, Upwork and Pigeon Loans.
Don’t forget the IRS
Family loans also carry tax implications. The IRS issues guidelines monthly for setting interest rates on family loans, known as the Applicable Federal Rates (AFRs). The AFR rate ensures that personal lenders avoid assessing below-market interest rates to avoid estate and gift taxes.
See:You’re not too young to have a will. Take care of your family with a simple ‘I love you, honey’ estate plan
While you might not consider yourself a high-net-worth individual, it is beneficial to incorporate a reputable framework to guide your lending terms. Also, it’s worth noting that interest on loans is taxable income to the lender. Consult your tax adviser on the best course of action for setting interest rates and reporting interest income.
When asked to borrow your money, think long and hard about what’s really at stake and the reward received by both parties for the risk taken.
Certified financial planner Lazetta Rainey Braxton is co-CEO and co-founder of 2050 Wealth Partners and CEO and founder of Lazetta & Associates. She is passionate about amplifying diversity, inclusion, equality and belonging in the financial planning profession and does so through financial planning, public speaking, writing, consulting and coaching. She was named a 2021 Crain’s New York Business Notable Black Leader and Executive as well as one of the Top 10 of Investopedia’s 100 Top Financial Advisors in 2020 and 2021. She is on a mission to create wealth for the common good.
This article is reprinted by permission from NextAvenue.org, (c) 2022 Twin Cities Public Television, Inc. All rights reserved.
More from Next Avenue:

(END) Dow Jones Newswires
09-14-22 1148ET
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.
© Copyright 2022 Morningstar, Inc. All rights reserved. Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.



Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.