Family and Friends

Family and Friends

Borrowing from family and friends is an interest-free alternative to payday loans.

Loan approval is quick and repayment terms are flexible.

There are, of course, risks involved. Listed below are the basics of borrowing from people you know and simple things borrowers and lenders can do to minimize risks

First of all, borrowing from people you know should be considered a last resort. If you can afford another payday loan alternative (such as a loan from a credit union), you should do that.

Do not put precious relationships at risk unless you have no other choice.

Always keep in mind that family and friends usually earned their money through thrift, hard work, sacrifices, investment or a combination thereof.

Never make a decision to ask someone you know for money lightly.

The benefits of borrowing from family and friends include:

  • no interest (but you should offer it – see below)
  • no security (loan based on trust)
  • quick and easy (albeit uncomfortable) application and approval
  • flexible terms and repayment schedule

The risks involved:

  • relationship dynamics may change (lender may try to exert power over borrower)
  • lender may loan money they cannot afford to lose
  • failure to repay loan may put family member into financial hardship
  • failure to repay may create emotional stress
  • failure to repay may damage or destroy relationship
  • destroyed relationships with a family members will create difficulties during family functions

Some things borrowers can do to minimize risks:

  • have a informal, written agreement that briefly outlines amount and repayment schedule
  • if possible, pay interest (preferably more than they would earn if their money was in a bank – it will still be much cheaper for you than a credit card cash advance or payday loan)
  • stick to the repayment schedule
  • repay loan as quickly as possible
  • never borrow money from people who cannot afford to lose the money (they may not tell you so you have to be perceptive, careful and absolutely sure the money is not needed)
  • never attempt to borrow a second loan while you have one outstanding
  • eliminate all luxuries/recreation until loan repaid in full

While the last one may seem obvious, we have seen cases of lavish spending before repayment including one case where a borrower went on two trips overseas while a loan from a family member was still outstanding!

Family members or friends may refuse to lend you money for a variety of reasons:

  • financial reasons (simply cannot afford to help you)
  • ethical reasons (they may feel that giving you money would enable rather than help you and that facing your crisis alone will increase your fiscal responsibility in the future which will ultimately benefit you in the long run)
  • personal reasons (convictions about borrowing/lending between friends/family or not wanting to risk relationship)

Whatever the reason for refusal, respect it.

Do not let a refusal change your relationship and do not ask for a reason.

If you are lending money to a family member or friend:

  • never lend more than you can afford to lose
  • always get an agreement in writing (even a simple handwritten note that outlines loan amount and repayment schedule is fine)
  • assume that the money is gone (you won’t be disappointed if the loan is never repaid and repayment will be a pleasant surprise)

If at all possible, it is always better to give/take between family/friends rather than lend/borrow.

Giving and taking tends to put less stress on relationships than loans but do not make taking a habit.

If you do not have family or friends to turn to (or if you do not feel comfortable asking them for money), please consider other payday loan alternatives before approaching a cash advance lender.

Recent Posts:

Random Posts:

GD Star Rating
a WordPress rating system