According to the financial site Money Crashers, lending money to friends and family is usually a bad idea. Family loans are often not taken as seriously by either party, which can result in misunderstandings and might end up damaging the relationship. Also, make sure that if you loan money to a family member, that you're fine with asking for it back. If you're going to feel uncomfortable about the whole situation, you might end up never seeing your money again.
Step 1
Arrange a meeting so you can have an honest talk. Avoid doing it over the phone, as this is a delicate topic and should be addressed in person. Let the other person know you need the money back. Say that you're sorry but you're in a bind and need the money to be returned. Don't be too apologetic, though, or you might end up hearing a sob story.
Step 2
Discuss payment terms. If the person tells you he can't afford to pay all the money at once, work out a payment plan. Agree on a weekly or biweekly amount until the total is paid off. Don't agree to a monthly repayment schedule. This leaves out too much of a chance for missing payments. Set firm rules for repayment and make a phone call if the payment is late and you haven't heard a reason why.
Step 3
Forgive part of the debt or waive the interest rate in exchange for getting the money back immediately, or agree to let the other person pay off part of the debt in something other than money. You can take something of value, like electronic equipment, or allow the person to work off the debt by doing errands for you or performing a service you need, whether that's website design or pet sitting.
Step 4
Take your relative to small claims court as a last resort. Unless you sign an agreement for the loan, it's your word against the other person's. Even if you win, collecting the debt is still up to you, as the judge can't enforce it. Taking a family member to court will likely damage the relationship forever, so make sure you're ready for that risk before taking the step.
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