Should I Take Loans from Family and Friends?
People loan money to friends and family members but lending money to someone you know has its pros and cons. Sometimes you get paid back and at times you don’t. Any of these two can affect a relationship between the person who lends money and the one who borrows.
The truth of the matter is that when you decide to loan money to friends or family, you don’t always realize how it can be fraught with problems that may not be obvious when you decide you want to make the loan.
Before we venture into the pros and cons, here are some of the reasons people lend money to friends and family members:
- You want to help – It’s natural to want to help someone you care about when they’re in a tough situation. When someone is in need and you can help, it makes you feel good.
- You don’t want to feel guilty if we you say no. You know if you don’t loan money to help someone who is struggling that it will weigh heavily on your conscience.
- You want to keep up the relationship. You feel like you can’t just refuse to help. After all, this is someone close to you. Deciding not to loan money could cause tension in the relationship because you weren’t willing to be helpful in their time of need.
All of these reasons show that you want the best for that person and for the relationship. But what happens when things don’t work out as planned? What if they don’t pay back the loan (which happens more often than not, by the way)?
Here are the pros and cons of borrowing from family and friends
- Borrowing from a family member can provide emergency money and help you avoid forms of borrowing with very high interest rates, such as payday loans and doorstep lending.
- If both parties are certain it will not harm a relationship with a family member if you don’t repay, this is a good option as it is normally interest free.
- If you’re borrowing from a friend, be aware that if you don’t repay, this could end the friendship.
- If you want to borrow from a family or a friend, make sure you draw up a budget beforehand, to see how much money you have left after paying your current living expenses.
- If a friend or family member does not make an effort to pay back the loan, then weeks or months later they’re showing you their expensive new clothes or the latest gadget they just bought, it compromises the relationship.