When people face sudden money problems, they will most likely turn for help to their relatives and friends in the first place. During challenging times and financial hardship, you may become the first person your loved ones will talk to.
If your close friend or a family member needs to get money today, there are several options. Whether your friend was suddenly laid off or your relative faced sudden health issues that led to unforeseen medical bills, here are some of the best options to consider if you want to help your family members and friends reduce financial stress.
Solving the Money Problem
Every person might experience urgent financial disruptions that need to be solved straight away. We all live in a fast-paced world where economic crisis happens unexpectedly. Not everyone is prepared to deal with financial emergencies while thousands of people don’t have enough cash set aside in their emergency funds.
The inflation and economic recession cause an increase of the price index and a decrease in the purchasing power of money. In 2021, the inflation rate increased again and the prices went up by 4.7 percent in the USA when compared to the previous year, according to Statista.
If you are ready to deal with this challenge, financial advice for your relatives and friends may help them solve their financial struggles and money problems.
Top Ways to Deal with Financial Issues
While we all may be concerned with money from time to time, you need to determine whether the problem they face is temporary or permanent and if they have a certain plan for preventing the same issues in the future.
1. Make a Personal Loan
When someone needs help with finances, you may consider making a short-term loan. This is a suitable solution for both of you as it will protect your funds. You need to write out the clear terms and conditions of the loan. Make sure you write everything on paper and make an agreement so that both parties know them. You may want to mention:
- The sum you offer
- The repayment terms: installment loan paid off in small parts or a lump-sum payment on the agreed date
- Payment due date (the date of the final installment payment or the full repayment due)
- The interest rates (simple or compound interest)
- Charges for late or missed payment (taking legal action, ceasing further loan payments, or increasing interest fees)
2. Give a Cash Gift
Those who are financially struggling may turn to you for quick assistance. If this is a short-term financial issue, you may decide to give a financial gift. Tell your friend or relative that you are going to give a money gift, and make sure they understand that it’s not a loan and shouldn’t be returned.
You need to determine how much you can afford to offer without leaving yourself broke. There are two options here: you can either give out the full sum straight away if the person faces an emergency, or you may give smaller amounts on a regular basis until the person solves the issue.
3. Co-Sign the Personal Loan
If a person you know wants to obtain a personal loan or a line of credit to finance short-term money needs but doesn’t have a good credit rating, you may become a co-signer. This is a person who signs the loan agreement together with the borrower and takes partial responsibility for its repayment.
It can be a suitable solution if a borrower has a low credit score and can’t qualify for affordable interest rates. If a co-signer has good or excellent credit, the borrower may be approved for a loan with lower rates and more flexible conditions.
Here is what you should do before you decide to be a co-signer:
- Meet with the creditor in person to understand all the loan conditions.
- Ask for a copy of the credit report and a monthly budget of your friend or relative.
- Get copies of all papers related to the personal loan you are going to co-sign.
- Ask the creditor to get you notified about late or missed payments. If the borrower fails to repay the debt on time, your own credit rating may suffer so you need to take quick action if something goes wrong.
4. Offer a Temporary Job
Not everybody feels comfortable giving a cash gift or making a personal loan. You may want to consider offering employment instead. It can be a side hustle to help your relative or friend earn additional money to cover their expenses and bridge the financial gap until the situation becomes stable again. It is necessary to discuss all the details and work requirements as well as the agreed rates.
5. Prepay the Bills
Another suitable option to help other people deal with a financial challenge is to prepay their bills. If your friend or family member struggles to cope with a mountain of bills you may want to suggest prepaying some of them (rent, insurance, utility bills, mortgage). It may be a helping hand for them to offer some time until they manage to recover from this challenge and get back on track with their finances.
The Bottom Line
If you really want to help your family or friend cover unexpected costs and solve money problems you should decide how to make a clear agreement between both of you so that the other person understands the responsibility to return the funds on time.
Financial assistance may be given in the form of a gift or a loan; you may offer cash or pay the necessary bills directly. Ask the person what exactly has happened and how you can help out in this particular situation.