Our Guide to Borrowing Money from Friends and Family

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Sometimes, loved ones can offer you help to get out of a bad financial spot by lending you money – or you might decide to ask a well-off family member for help when you’ve exhausted all other options. There’s certainly nothing inherently wrong with seeking help from people that you care about, and in many cases it can help you get into a worse situation; if you are considering a payday loan, for instance, then this could be a good alternative. However, it’s also something that can put a real strain on relationships if you don’t navigate it carefully.

Only borrow what you need

Turning to your friends and family for money to buy luxuries that you can’t otherwise afford might not be a great idea! It’s better to keep this kind of loan to the real essentials: try to borrow the minimum amount that you need to cover essential costs. If you’re the one asking to borrow money and your loved one seems in any way hesitant, you might want to look for alternative options. If they lend you the money reluctantly then it’s likely that your relationship won’t withstand the test.

Have a clear repayment plan

Before borrowing the money, work out a budget that allows you to make repayments over a set number of months. Agree this with your friend or family member before any money changes hand. You should both be very clear on the repayment terms – treat this as seriously as if it were a loan from a bank. Then, stick to your agreement! They should never have to chase you for a payment, and if you’re in a position to pay it back early then do so.

Consider paying interest

If you’re financial difficulties are only short term, then you might want to consider paying your friend some interest once you’re in a position to do so. Alternatively, show your appreciation with a small but thoughtful gift once you’re back in the black. It’s important to nurture the relationship, so that your friend/family member doesn’t start to feel like a bank.

Don’t ask for more

It’s very important that you don’t push the boundaries of what is being offered. Asking for more money could be taken as a sign that you really are reducing the relationship to a financial transaction: we don’t recommend it.

Of course, all relationships are different – these aren’t hard and fast rules. If you have an established dynamic with people who are happy to lend you money in certain situations then that’s fine too! Of course, it’s important not to take this kind of generosity for granted: if you’ve fallen into a pattern of borrowing money with certain people then we would recommend checking in with them to make sure that they’re still happy with the arrangement. Ultimately, the most important advice is to be open, polite and generous in return. When the tables are turned, you’ll want to be in the position to help your friends or family just as they’ve helped you!

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