Borrowing from your family and friends might be exactly what you need in an emergency situation. It means you can borrow money without having to get a loan and pay high interest rates.
However, when money is involved with family and friends it could always lead to harming your relationships. Not being able to repay or even taking longer to repay your family member can cause a strain on your relationship.
Therefore it is important to consider some things before deciding to borrow from family and friends.
Consider The Pros
The pros of borrowing from your family and friends are clear. It is less hassle than having to deal with a payday loan or another type of quick loan.
If you are in an emergency situation and need cash, you can borrow from someone that you trust that will not charge you high rates of interest.
Borrowing from someone close to you may also help you if you come into trouble repaying it back on time as they will give you more leniency than official loaners.
Consider The Risks
If you have decided to borrow from your family or friends make sure that you understand the risk involved.
Understanding what could happen to your relationship if you cannot repay the money on time or at all is important before deciding to go through with the loan.
Knowing that the family or friend you are borrowing from can afford to give you the money and wait until you are ready to repay also is important to consider.
Someone waiting on their repayment for themselves will be less likely to be patient if you are struggling to find the money.
Planning out how much you can afford to repay and letting the other party know can help settle nerves and make sure that the transaction goes as smoothly as possible.
Make sure that both you and the person you are borrowing from is well aware of your financial plan and your timeline for paying them back.
Consider Putting It In Writing
Although you are dealing with people that you are close to, it is a good idea to get the agreement down in writing.
Clearly spell out how much is being borrowed and when you are planning on repaying it. This avoids disagreements or complications down the line when you are ready to repay.
Having a more formal agreement, such as a contract, could be useful especially when dealing with larger sums of money.
If one of the parties passes away or is dealing with other complications, then having a formal agreement between the two of you can help settle any outstanding debts.
It is always advisable to speak with the solicitor about making the agreement more formal so that both you and the other party’s minds can be put at ease.
It could also be useful to use something as collateral. Using an item worth a good amount of money as collateral can help the loanee feel more comfortable about giving away the money, helping the process go smoothly.
Should You Borrow Money From Family And Friends?
If you have confidence that the relationship with your family or friend is not at risk by going into a loan agreement, then borrowing money from family or friends could be exactly what you need.
With no interest rates and more patience for repayments, family or friends can help you get out of a sticky financial situation, such as unforeseen car repairs or bills, without having to face the consequences of payday loans.
However, it is important to consider the risks involved and the potential harm it could cause to your relationship with the person you are borrowing from.
Also, it may be useful to draw up a contract between the two of you so that any complications can be quelled quicker and the communication is clear.