Almost everyone is faced with financial troubles once in a way and sometimes you may be pushed to the point of asking for a loan to overcome the situation. In such times, borrowing from close friends or family may seem to be the easiest option. Though such an option may provide you an open-ended loan with no timeline for repayment and no interest, it should only be your very last option. True, your loved ones and friends are your well-wishers and want to help you through difficult times, but dealing money matters with them is invariably complicated. Often times, borrowing money from them could be the beginning of a series of unexpected problems that could last long even after the money is repaid. Read on to understand three important reasons that explain why you should avoid borrowing money from friends or family.
What if you’re relative or friend can’t afford the money? There are chances that your loved one offers to help your regardless of his or her tight financial situation by lending or gifting money. They may comply with your request just because they cannot refuse to help, but may end up straining their financial obligations. Therefore, it would be wiser to refuse their generosity if it is going to cause issues for them.
It is better to look for financial assistance outside the circle of friends or family. Additionally, such a loan does not set any expectations, meaning that both the borrower and lender are left in a limbo. In due course of time, uncertainties put either party into anxiety. Financial security is important for everyone; it is not considerate to treat family members like free banking facilities.
One of the biggest misunderstandings associated with borrowing money from a friend or relative is assuming a loan for a gift. Often, the relative who is lending the money does not discuss the repayment terms but will eventually expect the money back. But, if you mistakenly believe that the money being offered is a gift, when it is actually a loan, the end result could be devastating to your relationship.
Not repaying the money on time may spell disaster for the borrower. Further, if you feel that you cannot repay the loan, avoid borrowing by all means. You must be in a position to repay gifts or help the family member in return. Or else, confusion and hurt feelings can make life miserable for both of you.
Borrowing from friends and family can make you feel delicate and awkward in family gatherings. You will happen to meet your relatives during birthday parties, holidays and several other occasions. As a borrower, you tend to feel uncomfortable being around the relative or friend who has lent you money. Moreover, it makes you uncomfortable amidst other relatives who know about the loans. It is even more awkward if the relative has offered you money with the intention that you will follow their suggestions or counsel. Recalling the proverb “the borrower becomes a servant to the lender,” you may force yourself to do everything that the lender suggests just to please him or her. The lender may expect you to entertain their whims and fancies even after you have repaid the money.
If at all you choose to borrow from a friend or family member, make sure that your initial discussion is an honest conversation about the potential problems and also clearly lays out the repayment terms and time frame. It is imperative to put the terms in writing because not understanding the facts will create tension later. An unstructured loan without legal requirements and contracts may not be fair as it will deprive the lender of a return on their money.
In a nutshell, the bonds of family and friends can bear simple financial transactions, but are not designed to tolerate the emotional burden associated with money. Money exchanges between friends and family can lead to big disputes that could result in a breakdown. Therefore, you must think carefully while considering a generous offer from a relative or borrowing interest-free loan from a friend. Analyze the consequences and more importantly consider the alternatives to save yourself from unfortunate situations.
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