Are there any best ways to borrow money from family and friends? Obviously not. However often we come across situations when we need to borrow money from family and friends.
Understandably, these aren’t pleasant or desirable situations. Normally, we turn to friends and family for money during emergencies or severe crises, when there’re no other decent ways left to get some cash.
However, there’re some Do’s and Don’ts when we borrow money from relatives and friends. At the same time, it’s also important to ask for a loan from people we know, in a proper manner.
Else, they might refuse to lend you the money when you need it desperately to meet some emergency or crises. And worse, it could ruin perfectly good relations you enjoy with friends and family. In fact, money is one of the main reasons for quarrels with friends or family members.
Best Ways to Borrow Money from Family & Friends
Should you ever face a situation that requires you to ask for a loan from family and friends, here’re some best ways to go about it. If you follow these simple tips and tweaks, there’re high chances they’ll lend the entire amount of money or at least a part of it that could help you meet any urgent needs.
Decide How Much You Need
This is the first and most important step before trying to borrow money from family or friends. Decide how much money you would really require to meet a specific need or emergency.
Make a list of expenses you have to meet with the borrowings. And include a small amount to cover or buffer any additional or unexpected spending for the crises or emergency.
That’s because it’s better to ask for a larger amount once than to approach people for loans several times. If you don’t use the full amount- it’s always possible to repay the balance immediately.
This also helps develop trust and goodwill between the lender and yourself. Arriving at a figure or sum also helps us to know whom to approach to borrow money.
List People That Can Lend Money
All of have “friends” and “family.” But while borrowing money, the definition of a friend or family member changes drastically. To ask for money, it’s important that you’ve healthy and proactive relations with the person.
Often, we call people a “friend” without really knowing them well. And we seldom have connections with several close relatives for a variety of reasons.
Therefore, it’s best to know who would be willing to help. And to what extent. If we have a relative or friend that doesn’t earn much money, it’s best not to ask such people. Because they might not be able to help. And you might cause them a lot of embarrassment by asking them for money they don’t really have.
Instead, find people who would have the resources to give you the money either the full amount or at least some part of it.
Never Borrow from More People
Once you know who can loan the money, the golden rule to follow: never borrow money from several people. If the amount you wish to borrow is quite large, ask only three to five people for the loan. Unless of course, it’s the proverbial ‘life or death’ situation where you’re justified in borrowing money from lots of people.
There’re three main reasons you shouldn’t borrow from more people.
The first is that repayment can become a problem. It’s always easier to pay one to three lenders instead of a dozen people. Secondly, you’ll be reducing the chances of people gossiping about your borrowing money from them.
And thirdly, asking for money isn’t an easy task. We’ve to swallow our pride and ego before approaching people. Hence, fewer people you ask, the better.
Pitch Your Loan Request Correctly
It’s always important to pitch your request to borrow money from relatives and friends in the proper manner. The best way of course, is to make the request for borrowing money in person.
To do so, you could fix an appointment with the relative or friend, unless you’re in a hurry. But if there’s a genuine emergency, you can simply call up the relative or friend and request for the loan.
In any case, it’s very important to present your request to borrow money in a proper way. Be absolutely clear and specific about the reasons you need to borrow money and tell why you believe the relative or friend could help you.
If possible, support your request for money with documents that could be anything from eviction notices to emergency travel or hospital bills, among others.
Documents clearly indicate you genuinely need the money and could tilt the balance in your favor when asking for money. Though a relative or friend might not be able to lend the full amount, they’ll offer at least some money if you convince them properly.
Agree on Repayment Terms
Remember, it’s important to repay the money you borrow, if you wish to keep a clear record and enjoy a good reputation among relatives and friends. Therefore, agree on terms of repayment before accepting the money. Obviously, this will depend upon your own financial situation such as income and expenses.
Inform your relative or friend about the duration of your borrowing and when you’ll start repayment. If you’re able to pay as soon as an emergency is over, it’s fine.
If not, agree on how much money you can repay every month. Also agree on the mode of payment. In some cases, a relative or friend may ask you to deposit the money to their bank account or debit card. Others may ask for cash repayments.
Also, be very specific about the date when they can expect the money to be credited to their account or when they can get cash from you. Be very realistic with repayment because agreeing to pay too much could send your household expenses in a tailspin.
Repaying lesser means you’ll remain in debt for long and people might not agree to wait for months to get back the money you owe them.
And if necessary, make a written agreement about the repayment terms. However, this would depend on the depth of your relations with a relative or friend. Some might feel offended if you offer a written agreement while others might actually expect one.
Offer to Pay Interest if Necessary
It’s always polite to offer some incentive such as an interest to the lender. Generally, people that’re close to you would never ask for an interest or any kind of incentive. More so, if you’re borrowing the money for an emergency or crises and they know you’re sincere about repayment.
Often, it might sound rude to directly offer to pay a small interest. Therefore, you can ask indirectly about how much money you should repay every month or one-off that would compensate for any inconvenience the person faces by lending you the money.
And in cases where your relative or friend doesn’t really want an interest or incentive, it would be good gesture to send a small gift when you repay the amount fully. Send a thank you note or card along with the gift.
Do’s & Don’ts to Borrow Money
While the above tips and tweaks speak about the best way to borrow money from family and friends, here’re some important do’s and don’ts too. These are equally important because borrowing money is a sensitive issue. And surely, we don’t wish to hurt anyone but continue enjoying that superb relationship with the person.
Never Offer Collaterals
A lot of people falsely believe they can borrow money by offering to keep collaterals as security. This means, asking the person to hold your jewelry or something precious till you repay. Without exception, this is in poor taste. You’re directly hinting the other person doesn’t trust you. And often, holding collaterals can be illegal.
Always Inform about Repayments
If you’re repaying the person in installments, always call them up on phone or send an email giving details about when and where you put the money in their bank account or debit card. And if you’ll be paying cash, fix an appointment to meet the person at their convenient time. Express your gratitude for the loan during such meetings.
Avoid Spending Binges
If you’ve borrowed money from friends or family, never indulge in spending binges or buy something expensive that’s not urgent. It sends strong feelers that you’re least concerned about repaying the money and instead, are spending on expensive stuff without thinking about the borrowings.
Keep Borrowings a Secret
This means, don’t announce or tell others you’ve borrowed money from someone. Because, this might tempt others to approach the same person to borrow money. This can destroy your friendships and cause bad impression among family members. Secrecy about any borrowings is important since it prevents lots of other problems.
Stash Aside Some Money
Stashing aside some money every month is very important. Nobody can predict the future. Therefore, if you suddenly fall short of money for any reason, you can repay the borrowings from the money you’ve stashed away.
It’s better to repay on time rather than default or backtrack on your promise. If you’re unable to pay the full amount, make sure you pay as much as possible to avoid default.
While I do hope that you never have to borrow money from family and friends, we can never say when an emergency or crises crops up. In such situations, the above tips and tweaks could make it a bit easier for you to get loans and meet any urgent needs.