We all go through tough times, and for some people, it can sometimes feel like there’s no way to climb out from under a pile of debt, especially when your only options are loans from lending institutes with sky-high interest rates.
Borrowing from friends and family can be a last resort, often because there can be a risk of relationships souring due to communication breakdowns and poor decisions. However, as complicated as friends and family lending can be, there are ways to keep your relationships safe.
Make It Official
Unofficial loans from family can get messy, especially if there are terms you thought you agreed to but didn’t appear to be clear with the person from which you were borrowing. However, if you create an official family loan agreement through online applications, you may be able to make sure both you and your family members are taken care of.
Family loan agreements are essentially official lending contracts with clauses and information regarding the loan amount, repayment schedule, interest rates, and a reason for the loan. When you use online loan agreement tools, you can even schedule payment reminders to ensure you never forget to make payments that might lead to family arguments.
Use It Responsibly
When you consider borrowing money from friends and family, make sure it’s for the right reasons. For example, you might need just a few thousand dollars more to secure a property loan, or your car might have broken down and requires repairs.
It’s your reasons for the loan that can determine whether someone would be willing to lend you money, so ensure you use it for its intended purpose. One of the fastest ways to ruin a relationship is by asking for money to repair your vehicle, only to use it to go on vacation.
Be Consistent With Your Payments
One of the most frustrating things about lending out money on the proviso that you’ll see it returned to you is not knowing when it’s all going to be repaid. Making inconsistent payments can be one way to sour a relationship.
Set up an automatic bank transfer so that your loved one can expect to see a certain amount of money each week or month until the loan is paid off. This gives them peace of mind that you’re doing your best to repay them, and it also allows you to budget for this outgoing during each pay cycle.
Only Borrow As Much As You Need
When you borrow from friends and family members, you often don’t need to pay high interest rates or, sometimes, any interest at all. It can be tempting to ask for more than you actually need, knowing that you’ll be able to pay back the principal and no more.
However, your loved ones aren’t giving you a loan to spend frivolously on unnecessary things like boats and vacations, and it can be frustrating to see you make poor financial choices with their money. Only borrow as much as you need and no more to prevent a strained relationship.
Many people strongly advise against borrowing from friends and family, but there are ways to do it responsibly. Make use of online family loan agreements, be responsible with the money you’ve been loaned, and pay it back consistently. You may then be able to keep your relationships intact.