Being a part of the family, you will always feel merciful towards those members whom you come to know are suddenly facing a fiscal burden. This might be due to unexpected unemployment, increasing debt, or an insufficient insurance to cover the accident bills. It is perhaps the time for you to do something for them either by lending from your own pocket or arranging a loan facility for them in a smart manner. Well, here are some safe options for you to consider for helping your suffering family members.
Give a Personal Loan
Chances are high for such a family member to come to you with an expectation of gaining a short-term loan. Although considered good to lend them, it is not advisable to become emotional and give them loan as a gift. Discuss with them openly regarding the terms of the loan and prepare a document to take their signature along with yours. Let the agreement state the amount of the loan, installment amount for repayment, the interest rate and the method of calculating such as simple or compound, payment due dates, and recourse in case of failure to pay in full or on time. Doing so maintains clarity to both the parties. In case you are lending a significant amount such as $20,000; you may wish to charge an interest rate that differs from the ongoing rate as well as study tax implications.
Offer a Job
One of the best ways to help your family member is to hire them for some kind of a service you need at a pre-decided rate. Doing so actually increases their self-esteem, as it goes a long way to aid them in earning their livelihood for meeting their routine expenses. At the same time, even you are able to complete your tasks without any kind of hassle. After all, family members are most reliable employees to hire! However, you need to treat them as employees by stating out clearly the work profile, salary, and provisions to adhere in case of incomplete or bad work.
Gift them Cash
This is one of the ideal solutions for a short-term financial problem through an upfront donation of cash. However, what you need to take care of is the amount you can afford to lend without inviting financial burden for yourself. Apart from that, you also need to decide whether you can give all the cash at once or in small installments on a regular basis. Just keep in mind that the money that you give is a gift, not an advance that you can expect to get back. Moreover, you will also have to know about the annual gift exclusion limit decided by the Internal Revenue Service (IRS) in case you are giving away a big amount.
Co-sign a Loan
While obtaining a loan, your family member might be asked for a co-signer by his lender. You can play that role by lending your good credit but do so only after analyzing the financial as well as legal implications. What you need to understand is that you are accepting to repay the loan in case the debtor fails to do so. If even you fail, the creditor has the legal right to take action against you to get the full amount even you may have told your family member that you would not pay.