If someone asks you to loan them money for a personal consolidation loan, you should proceed with caution. If they have financial habits that have put them in a position where they need to have their credit consolidation, you want to make sure they have broken these habits before loaning them money.
Also you should be away of how a personal loan will impact your friendship. In some cases it isn’t worth the damage it could do to your friendship in making them feel like a debtor to you. Your best course of action may be to help direct them to a reputable consolidation company nearby.
If you do decide to make a personal debt consolidation loan, make sure that you set realistic terms and that it is clear what is to be used as collateral. Collateral is what you get if they are unable to pay you. Their primary residence is a bad option for collateral because you aren’t going to want to take a house away from someone you know. A vacation home, boat, or second car is a better collateral option.
Doing personal loans to others for debt consolidation can be a tricky and dangerous thing. But if you are able to actually help a friend get out of debt, it can be very rewarding.
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