Bottom Line:
Borrowing money from friends or family is not a good idea as formality is often neglected. Not to mention the potential conflict that may occur between the lender and borrower due to stress, uncertainty, and tension. There is always a chance you could lose both your loan and your friendship.
Key Takeaways:
- It’s important to distinguish the difference between ‘a loan’ and ‘a gift’.
- Set timeline for repayments, and interest on the loan itself when borrowing from family or friends.
- If it’s in your power or abilities, help people avoid asking for money in the first place.
- If you are asking for money from family or friends, beware that the tension between you and the lender may cause guilt and anger.
- If you want to find out more about how to overcome your financial stresses, contact one of Debt Fix’s experts today.
Borrowing money from friends or family can be a very sensitive topic, but one that might ring a familiar bell to a lot of people. Whether you’ve experienced this yourself or heard stories second-hand, situations like these can prove to be quite complicated for all those involved. Whilst the concept of borrowing and lending money may be driven from a desire to help and the belief that it’s a harmless gesture, there’s a reason why so many relationships break down due to money problems that should have been avoided in the first place.
Here at Debt Fix, we’ve helped many people overcome their debt problems and have heard lots of personal stories along the way. This article looks at four reasons as to why we think borrowing money from friends or family is not a good idea.
Open-ended Loans; No Formality
It’s important to distinguish the difference between a ‘loan’ and a ‘gift’. From a lender’s point of view, if you lend someone money it would be safe to think that you expect to be paid back in the future. But how often does this end up in good terms? When it comes to friends and family, we often neglect formality in dealing with procedures like this. There’s no binding agreements, no set timeline for repayments, and no interest on the loan itself!
In carrying this line of argument, a borrower’s perspective may be that repayments are not seen as a priority, which means there is no motivation to take it seriously or put a sense of urgency around repaying it. There is no guarantee that your money will be paid back. Not to mention the potential conflict that may occur between the lender and borrower due to stress, uncertainty and tension.
A Step Back For Relationships of Any Kind
More on the topic of conflict; have you considered how awkward asking for money is, and what it must feel like for the potential lender? What are you going to do when they refuse? And even if they do lend you money, will it affect your relationship/friendship? It’s well worth noting that people who borrow money feel that they have to please the lender as a gesture of gratitude. It becomes very difficult to oppose this lender in anyway.
Even if the borrower makes the best out of the situation by asking for money from people who may be in a position to do so, it can cause personal delays in the lender’s own life. They too may have plans based on their financial status.
It Might Only Be a Short Term Solution
When someone asks you for money, is it possible that you can help them in other ways? Depending on the individual and the circumstances, giving money may only be a short term solution before the same problems start to occur or their finances exacerbate. Is it possible, or even likely that they may come back asking for even more money?
The adage of ‘teach a man how to catch a fish’ tells us that you can teach others to overcome their repetitive nature. If it’s in your power or abilities, help people avoid asking for money in the first place and see what you could do for them.
You Could Lose Your Money and the Relationship
There is always a chance you could lose both your loan and your friendship. Financial struggles are a strong point of contention in any relationship. It’s a matter of trust between people, and not being able to see eye-to-eye about how one spends their money or the infrequency of repayments will leave people vulnerable to conflict and disagreements. If you are asking for money from family or friends, beware that the tension between you and the lender may cause guilt and anger.
Speak To Debt Fix About Consolidation
Our expert staff has the experience and resources to help you overcome your financial stresses, and plan for a brighter future. Contact us today, or send us a message to find out more.