What Should You Consider Before Borrow Money From Friends And Family?

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What will you do, when you need money urgently? borrowing money from family or friends, or going for a bank loan? For most of us the first option is more convenient.
Friendships and personal relationships are the best assets we have with people.  Before borrowing from someone, study your borrowing behaviour.  Don't let your relationship be reduced to a financial transaction.

Make an effort to maintain your current relationship with your lender. Don't let all conversations be about the money.

Read this before you borrow money from friends and family:

Check the relationship equation

Money often crunches personal relationship. Before borrowing money, review how it could impact your relationship with the lender. Before borrowing money check few things like your relationship with the lender, have you borrowed from him before? how you repaid the loan at that time?

Exhaust all other options

A personal loan is the last thing you should do, you have to try all other options available.  Before you ask for a borrowing, make sure you've already taken positive steps towards improving your finances. You aren't ready to take the responsibility of a loan from a friend or relative before improving your financial situation. The responsibility of borrowing money falls on the borrower. The person should establish a good habit in advance of borrowing and explore borrowing as a last option to bridge a small financial gap.

Pay interest

If you are borrowing money for a long term, pay interest for the money he or she is giving you. An interest-free loan is basically a gift. You can earn interest risk-free by depositing money in a bank. A lender willing to extend an interest-free loan is forgoing income in order to help you. it's gracious, but as a borrower, it should be unacceptable.

The plan to repay

Before asking someone to lend you money. Give yourself a  deadline for repayment. Plan how to repay the amount back.  Try to set an alternative plan, in case you are unable to pay. If you are not sure about repayment, reconsider your decision to borrow.

Pay interest

If you are borrowing money for a long term, pay interest for the money he or she is giving you. An interest-free loan is basically a gift. You can earn interest risk-free by depositing money in a bank. A lender willing to extend an interest-free loan is forgoing income in order to help you. it's gracious, but as a borrower, it should be unacceptable.

Pay off early

Make efforts to pay off early. There is no excuse to late the payment. Paying the amount early will helps to keep the trust in your relationship also.  If your financial crisis get improves before the end of the loan's period, you can pay it off early.

Make it a document

Don't commit mistakes while borrowing from relatives and friends. Always put the things on paper. This agreement should contain the details of the loan like the time period, interest rate, etc. Otherwise, the interest rate or other details can be changed over time. This can expose you to great problems. Even our relationship and trust will be strong, but an agreement is good for all.

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Read more about: borrow, money, debt
Story first published: Friday, February 17, 2017, 14:16 [IST]
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