Picture this. Your brother invites you over for dinner, and everything’s great, until he pulls you aside and gives you a sob story about how his family is really in a tight spot financially. Then he asks if he can borrow some money, and he promises he’ll pay you back. Or, maybe you get a phone call from your daughter who doesn’t call nearly often enough, and you’re enjoying catching up. Then she tells you about a house she and her husband want to buy, but they need help coming up with the down payment. Instead of a loan from a bank, she wants a loan from you.

What do you do?

The experts advise – Just say “no.”

It’s not that simple though. These are your family members. You want to help them out, and you want to believe they’ll pay you back. You also don’t want to hurt your relationship with them by saying “no” when they’re asking you for help.

It would be better to say “no” tactfully than to potentially destroy your relationship down the road if they never repay the loan. There have actually been cases where children borrowed large sums of money from their parents to buy things like houses, and the parents ended up suing their children when they refused to repay the money. Don’t let that be you.

So, how do you say no? There are several ways to approach this.

1. Offer to Help (but Not with a Loan)

   You can offer to do things like look at their finances and make suggestions about ways they could save money. You could help them sell items they don’t need anymore to raise money that way. You could suggest alternative side businesses they could use to earn extra income, like selling things on etsy, starting a dog walking business, or doing odd jobs like hanging Christmas lights.

2. Educate Them on Other Loan Options

   A loan from a bank may be more affordable than your relative realizes. If you really think he or she is a good risk, you could offer to co-sign the loan if necessary (but only if you really think he or she is a good risk).

3. Give a Gift

   If you have the funds available and you really want to help, you could offer to give your family member a small sum of money to help out, no repayment required.

4. Get It in Writing

   If you still feel like you need to loan the money, there are some things you can do to protect yourself. Make sure you get the terms of the loan in writing. A simple IOU works. It doesn’t have to be a formal contract (although it can be), but you want to make sure that you’re both in agreement about the amount of the loan and the terms of repayment.

5. Don’t Gossip

   If you loan any money or give any money as a gift, agree that neither or you will gossip about it. You don’t want other family members coming to you asking for money, and the person borrowing the money will probably appreciate the discretion.

Have you ever loaned money to a family member? Did he or she pay you back?