Financing or loaning money is basically lending money to someone else. There are two main reasons why a person would lend money. First being, he wants to earn some revenue in the form of interest and the second being that he just wants to help the other person out. Now let us look at what are the key things that the lender should look for while lending money to someone else:
1. The lender should know him personally. He must be either be a friend, a relative or a colleague. At least the borrower must have been introduced to the lender by some friend of his. These things are looked into because there are higher chances of you not getting your money back when you lend it to someone whom you are not familiar with.
2. Find out the history of his previous borrowings and just study their pattern of borrowing. If they are regular defaulters, then it would be not a nice idea to lend money to such people.
3. Find out why the borrower is borrowing the money. Is it legal or something illegal? If it is legal, then it should not be a problem lending the money. But if it is for some illegal purpose, then refrain from lending money to them as it would not only put them into trouble in the future but also you for having lent the money.
The following are some of the ways in which money should be lent or not be lent:
1. Lend money online: People lend money mostly during the times of an economic slowdown or recession kind of an environment. As most of the banks are not willing to lend money due to the fear of default by customers, private individuals cash in on this situation by lending some money online and earning some revenue in the form of interest. But there are also a few people who do not lend money for interest but just loan it out for free with the intention of helping their countrymen and reviving their national economy. There are some people who lend money to underdeveloped or natural disaster affected countries to help them recover from the trauma of the disaster.
2. Never lend money to family: It is highly advisable that you refrain from lending money to your family members as you relatives would take the money borrowed from you for granted and would least bother about giving it back to you which might result in a strain in the relationship.