When I was a college student, I shared an apartment with two graduate students. We each put one of the utilities in our names, and then we paid our roommates our portion of the utilities in their name. I left for summer break and got the last bill. I asked both roommates to pay me the $100 they each owed me. One paid; the other did not. To a broke college student, $100 is a lot! I drove the one and a half hours to the college where my former roommate was teaching a class, waited outside the classroom, and then asked for my money. He wrote me a check for $100 immediately. Sometimes, you have to take drastic measures to get the money you’re owed.
4 Effective Ways to Collect Money from a Borrower
If you lend money to friends or family, you may sometimes find that they don’t pay you back promptly. This can be an uncomfortable position to be in. However, there are effective ways to collect money from a borrower.
Sign a Repayment Agreement
When you decide to lend cash to a friend or relative, consider asking them to sign a repayment agreement. Doing so is especially important if you’re loaning a large sum of money. Include the amount you’re loaning, what the interest rate is (if there is one) as well as what the payment amount is, and when it will be due. Then, have it notarized by a notary public. Following this procedure will give you a paper trail if the person doesn’t pay and you need to take him to court.
Set a Deadline
If you lend someone a smaller amount of money and don’t have her sign a repayment agreement, give her a deadline. You might say, “I can loan you $200, but I’ll need it by the first of the month because that’s when’s my rent is due.” If the person can’t agree to repay you by the deadline, then don’t lend her the money.
Remind Her That You Need the Money Back
If you have already given her a loan and she isn’t paying it back promptly, try to remind her. You might say something like, “Do you remember that $200 I lent you that you were going to pay back by the first of the month? I’m just wondering when you will be paying me back.”
Take Him to Court
If you loaned a large sum of money and the person is not paying you back, you could take him to court. However, this is the last resort as it will likely be expensive for both of you.
Barter Instead of Asking for Cash Back
If the person has not paid you back, and you’re certain he won’t, you can try to barter instead of asking for the cash back. If he is handy, maybe he could clean your gutters in the fall so you don’t have to hire someone. Or, maybe she could trade you something she has worth the price of what she didn’t pay you back.
If you lend someone money, utilize these effective ways to collect money from a borrower. Chances are, if you struggle to get your money back, you may decide in the future that lending money is not worth the hassle. Then, you can either give someone cash as a gift that doesn’t have to be paid back or simply say no to anyone who asks to borrow money.
Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York where she loves the natural beauty of the area.