How to borrow money from loved ones without ruining relationships
We all go through rough times, and to some people it can sometimes seem like there’s no way out of a pile of debt, especially when your only options are loans from credit institutions with debts. exorbitant interest rates.
Borrowing from friends and family can be a last resort, often because there can be a risk of relationships deteriorating due to communication breakdowns and poor decisions. However, as complicated as lending from friends and family can be, there are ways to protect your relationships.
Make it official
Unofficial family loans can get complicated, especially if there are terms you thought you would agree to but weren’t clear with who you were borrowing from. However, if you create a formal family loan agreement through online applications, you may be able to ensure that you and your family members are taken care of.
Family loan agreements are basically formal loan agreements with clauses and information about the loan amount, repayment schedule, interest rates, and the reason for the loan. When using online loan contract tools, you can even schedule payment reminders to make sure you never forget to make payments that could lead to family arguments.
Use it responsibly
When considering borrowing money from friends and family, make sure it’s for the right reasons. For example, you might need a few thousand dollars more to get a home loan, or your car might be broken down and need repairs.
It is the reasons for your loan that can determine whether someone would be willing to lend you money, so be sure to use it for its intended purpose. One of the fastest ways to ruin a relationship is to ask for money to fix your vehicle and then use it to go on vacation.
Be consistent with your payments
One of the most frustrating things about loaning money on condition you see it returned to you is not knowing when it will all be paid off. Making inconsistent payments can be a way to degrade a relationship.
Set up an automatic bank transfer so that your loved one can expect to receive a certain amount of money each week or month until the loan is paid off. This gives them the peace of mind that you are doing your best to reimburse them, and it also allows you to budget for these expenses during each pay cycle.
Borrow only what you need
When you borrow from friends and family, you often don’t need to pay high interest rates, or sometimes no interest at all. It can be tempting to ask for more than you really need, knowing that you will be able to pay back the principal and not more.
However, your loved ones don’t give you a loan for frivolous spending on unnecessary things like boats and vacations, and it can be frustrating to see you making bad financial choices with their money. Borrow only what you need and no more to avoid a strained relationship.
Many people strongly advise against borrowing from friends and family, but there are ways to do it responsibly. Use family loan agreements online, be responsible for the money loaned to you, and pay it back regularly. You may then be able to keep your relationships intact.