In life unexpected events occur leading us to need to borrow some money to tide us over. While there are money financial institutions such as banks and personal loan providers we can turn to, you could be tempted to ask the people you know for help – especially in an emergency. Circumstances differ but if you’re looking for an injection of cash it may be a good idea to avoid borrowing from friends and family. There are many reasons for this, some of which are outlined below:
The burden of open-ended loans
One thing about loans between family members and friends is that they are usually open-ended. This means that there is no definite repayment period for the loan agreed upon; a situation that can cause confusion or disagreements over repayment times and amounts. This is unlike borrowing from personal loan lenders such as Fast Money, where clear repayment figures and dates are agreed prior to the loan being paid out.
Don’t become ‘that guy/girl’!
Another issue with borrowing from friends and family is that there is a risk that you could be seen as that person who always asks for money. This may not be true of course but we all go through financial ups and downs that it may seem easier to just ask a certain family member for help. Unfortunately, despite good intentions on both sides, resentment can sometimes build, thereby straining your relationship.
The person you borrowed from has an emergency of their own
Another thing to consider if you’re thinking of borrowing from someone close to you is the fact that they may experience some financial trouble themselves and ask for their money back. In most cases they will ask for the full amount, and you may not be able to comply at the time of asking. This is in complete contrast to borrowing from a legitimate lender, with whom the monthly payments and the loan period are bound by a contract.
The potential to strain relations
The points mentioned above have the potential to strain relations between the lender and the borrower despite their ties as friends, acquaintances, or family. Money is one of the most difficult subjects to discuss and your friend may feel uncomfortable enquiring about the loan. This may then lead to a strain on your friendship or family ties.
Family gatherings may become awkward
Following on from the above point, strained relations mean that any family gatherings or work outing may become potentially awkward with the loan becoming an elephant in the room. This is why it may be a good idea to get a personal loan form a licensed provider as the relationship remains professional and is does not impact on your personal life.
As we can see, it is a good idea to avoid borrowing money from friends and family wherever possible. The points raised above show the pitfalls of doing so and show that it may be better to explore other options.