As social beings living in the society, you first like to approach family & friends. However, they may or may not be willing to lend money. It will totally depend on your personal equation & openness to discuss important matters. Money has also been the determinant of many crucial relationships by judging its foundation. So, money forms an important part of life and we judge when someone’s fallen short of it. This is exactly why it’s so important to have a trusted group of persons to lend valuable tips on borrowing.
And ofcourse you’re caught up with financial crisis to reach out to your friends and family for money. Else why would you. The reasons could be anything for basic essentials such as house repairs, medical consultation to consolidating debts and organizing wedding expenses. We extend our cash requirements in expectation of exemption from interest rates, fixed repayment plans, etc.
Here are the 5 rules to follow while lending to friends and family as a preferred idea:
- Constant communication– Typically, when an individual approaches a friend or family member, there’s no documentation ready in place. This can easily bring up conflicts. This creates room for miscommunications and misunderstandings which can last longer sometimes. Let’s say you already have a debt, then a family friend may be hesitant to lend in the first place. Or maybe you’ve repayment defaults to your credit, this will also discourage a close friend from lending money at all. All these expectations without documents in place can create differences.
- Reach an agreement– Obviously, when you work with a legal entity, there’s a formal agreement for signing. This significantly helps to keep all the confusion away. So, for a certain amount of cash paid, an equivalent is paid back along with interest. However, a friend or family member can always have a personal motive to construct terms and conditions as per suitability.
- Take an informed decision: A friend may like to know the purpose of your borrowings before taking a final call. Infact, they can try to dictate your decision in favor or against your wish. And finally your decision will be completely different from how you like it. For example, you want to replace your old refrigerator or cut down your expenditure on luxury items. However, this near and dear one may influence you deliberate his/her own lending.
- Avoid Sour Relationships– Another important repercussion is that it could easily create differences between close friends or family. A non-repayment or small repayment can permanently affect relationships. Similarly, a lender may feel mighty enough and start acting differently towards you.
- ROI comparison & returns- Perhaps, you’ve put up a poker face to your loved ones for money & your intentions never been to make a repayment. This will not only impact your personal relationships but also spread a bad mouth about your image & doings for future. So, better avoid any frivolous use of the borrowed money.
It’s important to understand that friendships are priceless and shouldn’t be exploited for money purposes. Else, it can create a lifetime of sourness. So, before arriving at a decision, weigh all the pros and cons of lending to close friends and family. Stay mindful of the sanctity of friendship in comparison to financial matters.
So, you can consider a loan as an alternative to raise funds for your financial dailies. The best advice is to stay within your financial boundaries & get a personal loan at maximum. If you don’t want to get into ugly fights while discussing debt & lending, then it’s best to go to a leading personal finance advisor. Better stop beating around the bush.