4 Mistakes to avoid while borrowing money from family and friends
4 Mistakes to avoid while borrowing money from family and friends
It is not unusual for people to be strapped for cash at some point or the other in their lives. This could happen anytime – whether during your good old student days when you are struggling with student loans, rent and more or even when you are just starting out in the real world and can't cope with the number of bills that keep piling up.
When such a situation arises, often it is hard to get a loan from a bank especially if it is for something small and you don't have a good enough credit score. At this point, you are forced to go to your parents, relatives, or even friends to help you out.
Although it is not forbidden to ask your loved ones to help you out during a tough time, here are four mistakes you should never make when you borrow money from friends and family:
Lower their credit score
Building a good credit score is difficult and if you are asking someone like your parents to co-sign on a loan and then you end up defaulting on the payments, even their credit score takes a bad hit. If you are borrowing a large sum of money, and there is a chance you might not be able to make payments, it is best not to ask your loved ones to be the guarantors. If you are in dire need of money, it makes sense to borrow money from them directly in cash rather than make it complicated with loans and interest rates. Remember if they are helping you out, you have to make it easier for them and compromise on the mode of lending.
Show no concern
While your loved ones might readily agree to lend you money in your time of need, you cannot assume that they can accommodate the amount you are requesting. You also cannot take your own time to pay them back. Your family and friends might feel awkward to ask you, but you need to initiate the conversation by paying them back at least in parts as fast as you can. You never know how much they might need the money, so always keep them in mind and pay it back as soon as you are in a position to do so.
Communication
In order to give your lender some peace of mind, openly have a conversation with them about what you are spending it on, when they can expect the money to be returned, whether they’d want to charge the interest rate, and more. If you do not keep the lines of communication open and clear the air, there will always be a sense of unease and mistrust every time you meet them, especially if you have not paid them back yet.
Borrow large sum
If you are looking for a lot of money to borrow, do not ask a single person for the whole amount. Rather, see if you can split it between two or three family members. It will make it easier for you to pay it off every month and you will not be putting your family member in jeopardy by asking a large sum.
In order to have a healthy relationship with the person you borrow money from make sure you don't make these mistakes. It will make it easier and your family and friends will trust you more next time.
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It is not unusual for people to be strapped for cash at some point or the other in their lives. This could happen anytime – whether during your good old student days when you are struggling with student loans, rent and more or even when you are just starting out in the real world and can't cope with the number of bills that keep piling up.
When such a situation arises, often it is hard to get a loan from a bank especially if it is for something small and you don't have a good enough credit score. At this point, you are forced to go to your parents, relatives, or even friends to help you out.
Although it is not forbidden to ask your loved ones to help you out during a tough time, here are four mistakes you should never make when you borrow money from friends and family:
Lower their credit score
Building a good credit score is difficult and if you are asking someone like your parents to co-sign on a loan and then you end up defaulting on the payments, even their credit score takes a bad hit. If you are borrowing a large sum of money, and there is a chance you might not be able to make payments, it is best not to ask your loved ones to be the guarantors. If you are in dire need of money, it makes sense to borrow money from them directly in cash rather than make it complicated with loans and interest rates. Remember if they are helping you out, you have to make it easier for them and compromise on the mode of lending.
Show no concern
While your loved ones might readily agree to lend you money in your time of need, you cannot assume that they can accommodate the amount you are requesting. You also cannot take your own time to pay them back. Your family and friends might feel awkward to ask you, but you need to initiate the conversation by paying them back at least in parts as fast as you can. You never know how much they might need the money, so always keep them in mind and pay it back as soon as you are in a position to do so.
Communication
In order to give your lender some peace of mind, openly have a conversation with them about what you are spending it on, when they can expect the money to be returned, whether they’d want to charge the interest rate, and more. If you do not keep the lines of communication open and clear the air, there will always be a sense of unease and mistrust every time you meet them, especially if you have not paid them back yet.
Borrow large sum
If you are looking for a lot of money to borrow, do not ask a single person for the whole amount. Rather, see if you can split it between two or three family members. It will make it easier for you to pay it off every month and you will not be putting your family member in jeopardy by asking a large sum.
In order to have a healthy relationship with the person you borrow money from make sure you don't make these mistakes. It will make it easier and your family and friends will trust you more next time.
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