How To Properly Borrow Money From Friends And Family? Getting a loan from your loved ones can be a touchy subject. If not done correctly, it can put a strain on your relationships. Before asking your friend for a loan, you may consider other options.
You can get a personal loan from online lending platforms if you need cash immediately. There are a variety of reasons you may need the fastest money you can access: wedding expenses, home improvement, debt consolidation, or school expenses, to name a few,” elaborates Harrison Jones, a financial analyst and contributor at MoneyAsap.
However, if you have no other option and need to borrow money from your loved ones, follow these tips to prevent drama.
Borrowing Money From Friends And Family — Should It Be The First Or Last Option?
Requesting a loan from from friends and family can be a difficult decision to make. If you’re considering this option, it’s likely because you’re in a financial bind and need the money to cover expenses.
While borrowing from your loved ones may seem like an easy solution, it can come with several risks. First, you risk damaging your relationship if you’re not careful. Money can be a sensitive topic, and if you’re unable to repay the loan promptly, it could lead to tension and even arguments. Borrowing money can also create feelings of indebtedness and obligation, which can be burdensome for both parties involved.
For these reasons, it’s important to exhaust other options before turning to friends and family for assistance. Ultimately, we think that borrowing from loved ones should be your last option when facing financial difficulties.
Tips To Borrow Money From Friends And Family
Straighten Out Your Finances First
You need to be aware of your financial situation to present a compelling case. Before asking anyone for money, you should take a good hard look at your finances. Look into your cash flow and determine ways to reduce expenses or increase your income. Also, ask yourself if you can afford to pay back the money you want to borrow. If not, it’s probably best to wait until you can.
Ask Only People You Trust
Once you’ve decided that you can afford to repay the loan, it’s time to start thinking about who you will ask. Ideally, you should only borrow from people you trust and have a good relationship with. They’ll be the ones who are likely to agree to lend you money.
Avoid Asking Someone Who Isn’t Financially Secure
Aside from the trust factor, you should also consider if the person is financially stable and not struggling to pay their bills. Avoid asking people who are struggling financially themselves. Not only is it unfair to put them in that position, but they may not be able to lend you money even if they wanted to.
Ask In Person
When you’re ready to ask for the money, do it in person. Doing this will show that you’re serious about repaying the loan, are not afraid to have a conversation about money, and are ready to answer any questions. Lastly, asking in person will increase the likelihood of your loan being approved.
Borrow What You Can Afford To Pay
Be realistic when indicating the amount you need to borrow, and only state what you can afford to pay back. However, you should also refrain from asking too little—only to borrow more later.
Establish A Repayment Plan
Once you’ve agreed on the loan amount, it’s time to establish a repayment plan. It would help if you put this in writing, and both parties should sign it to prevent misunderstandings about when and how much you’ll be repaying the loan.
Offer To Pay Interest
Although your friend or family may not take you up on this offer, you should still make it available to them. It doesn’t matter if it’s an interest rate lower than the current rate in the market; what matters is that the gesture will show them that you appreciate them lending you money.
Give Help In Return
If you’re able, offer to help your friend or family member with something they need in return for the loan. This could be doing chores around their house, watching their kids, or even lending an ear when they need someone to talk to.
Alternatives To Borrowing Money From Friends And Family
While your friends and family may always seem adamant about lending you a helping hand with your financial needs, it’s best not to constantly rely on them as it could strain your relationship in the long run. To be more financially stable, you can do the following:
- Look for areas in your expenses where you can improve and spend less.
- Come up with a monthly budget and make sure to stick to it.
- Increase your income stream.
- Request a salary increase (if you feel you deserve it).
- Sell things you’re no longer using.
- Get an unsecured personal loan instead.
- Ask for a lower interest rate on your credit cards.
Borrowing money from friends and family can be a tricky situation. You don’t want to strain your relationship; on the other hand, you may not have any other choice. If you’re set on doing this, follow our tips above to navigate this delicate situation properly.