How to borrow money from loved ones without ruining your relationships
Borrowing from friends or family can be a great way to get the money you need quickly, but unless you are careful, things can turn sour fast. Keep the following tips in mind next time you borrow money from loved ones and avoid jeopardising your relationships.
Be careful who you ask
There is a considerable power dynamic involved in lending or borrowing money that can seriously harm a relationship, so rather than just approach the richest person you know, try someone you have a good rapport with already. Asking a good friend for help will be a lot easier than pleading your case to someone that doesn’t know you as well; it is also far less likely that the situation will get weird.
Only borrow for emergencies
Never borrow money for frivolous expenses and only ask your friends for money once you have exhausted all other options. Apart from minimising the amount of money you need to borrow, this will also show that you are making a serious effort to handle the situation, increasing the chances that people will want to help you.
It is important that you are honest about your situation, as dire as it may be, because if you expect people to lend you money it is only fair that they know what they are getting themselves into. Honesty is particularly important if you start to struggle making those repayments, otherwise your reputation and your relationship are sure to suffer.
Come with a plan
Make sure you can explain exactly how much money you need as well as what you need it for. Set realistic expectations about repayments and agree on a course of action to take in the unlikely event that you fall behind. Your plan should also be fair for both parties, so consider offering something as collateral or even paying a small rate of interest on the loan.
Keep it private
Personal finances are always best kept private. Never ask someone if you can borrow money in front of other people, as it can be awkward and embarrassing, and agree to only ever talk about a loan in private. Bragging about your loan is also a very bad idea, as it can make your lender the target of unwanted loan requests.
Even though it may seem unnecessarily formal, it is wise to document the details of your loan and for you both to sign and date the agreement. Not only will this show that you are taking the loan seriously, it will protect both parties if a dispute arises that ends up going to court.
Make timely repayments
Failing to repay a loan on time can put a lot of strain on a relationship, so do whatever you can to make your repayments on time, if not early. Until that loan is paid in full there is no excuse for spending money on luxury items, instead, every spare dollar should go towards your repayments.
If you need to borrow money from friends or family it is important to take the situation seriously; otherwise, your money worries might end up costing you friends.