At some point in your life, you would reach a point where borrowing money would seem like a logical thing to do. It can be to buy yourself a brand new or second hand car for personal use. It can even be to finally reach your dream of buying that house for you and your family. At times, you might also have business ideas that you want to pursue and you need money to make it happen.
There are a lot of borrowing tips that you will hear from people and the tricky part is filtering out those that you can use and the ones that will just put you in peril. Some people would be quick to tell you that the best and safest route would alway be the bank. To some certain extent, that is true because they have the capacity to review and look at your financial status to determine if you have the ability to repay the loan or not.
There are also some people who might point you in the direction of loan sharks, payday loans and other risky options. This can put you in a lot of trouble and because the interest rates on these options are astronomical and they have very strict policies on payments. But as CNN.com shares, almost half of American consumers are saving almost nothing under their name, borrowing money will always be the next logical thing.
Apart from traditional lenders and the risky ones, you might have the idea of approaching family members to try and see if they can lend you some cash. Your parents and grandparents are almost always at the top of your list simply because you know there is big chance they will lend you some. This of course assumes that you have a great relationship with your folks.
Your siblings are usually the ones that are next on your list especially the ones that are older than you and has a stable job. Your uncles and aunts and other relatives follow next particularly the ones you are closest to. They are the ones that know you the most and the people who would most likely take out their wallets willingly.
Borrowing money from relatives
One of the first thoughts you might have with this is the ease of borrowing money from people you already know. Time.com even goes on to say that not all financial transactions between family and even friends end up in a disaster. But despite this, there are a few things you need to keep an eye out for when considering to borrow money from family members.
- Do not take the money if there are strings attached. When you take out a loan from the bank, it is pretty obvious and they even make it clear that you need to repay that amount over a period of time with regular monthly payments. When it comes to family, this is not usually the case. There are a lot of strings they can attach to that loan and you need to figure it out even before you accept that financial help. They might be expecting that you follow their advice on your business direction or worse, they might be asking for a majority stake at whatever it is your are putting up.
- Clearly define the repayment terms. Debt payment should come naturally for your and family loans should not be an exception. Just because you know them and know for a fact that they might not need the money now does not mean you can postpone paying for your loan. You need to treat is just as you would your other financial obligations. Have a repayment schedule where you both agree on and stick to it until you pay off your loan.
- Do not ask if you know they cannot give. Family members love each other and some have been know to take that to the extreme to the point where they will loan you the money even if they cannot really afford losing that much amount in their budget. Before you ask your family and other close relatives for a loan, take their financial situation in consideration first. If you know for a fact that they are already trying to make ends meet with a second job just to keep their house then it might not be a good idea to ask them for a loan. What you should do is help them and not burden them even further.
- Think twice if the terms are unclear. If your uncle or aunt tells you that you must pay back the money but not sweat about it too much or if they tell you they are giving you a 6-month grace period but start asking about the money 2 months into it then you should reconsider that loan. The terms has to be clear that you do not worry about your uncle calling you in the middle of the night demanding that you pay up 50% of the loan amount by tomorrow. This manages the stress as well as the relationship you have moving forward.
- Do not take the money if your see potential problem. You might have that one rich relative who has lent money to family members but you also know for a fact that the relationships between those family members are not doing so good. If you strain your relationship with a bank manager, the chances of seeing them again are slim. But if you do the same thing with a family member, the next family reunion might get a little interesting. Manage your relationship and step away from that loan if you know for a fact that it poses potential problems in the future.
How to get the money you need
If you are strapped for cash and you do not want to risk asking family members for a loan, here are two things you might want to focus on to get the money and save your relationship.
- Save up the money. There are a lot of ways to save money and the best way to go about it is just to start with it. Just start saving whatever amount you can set aside and do it on a continuous basis. Develop the habit early on so it becomes second nature to you as you go along. Take a look at what amount you need and break it down on smaller doable targets so you can track your progress.
- Take out a loan on your own. If saving is out of the question based on a non-movable timeline then you might want to work on applying and getting a loan for yourself. Borrowing money on your own can even be a life changing lesson. Before you approach any lenders, make sure that you are ready for the loan. One way to do this is to check your credit score and see if it will get your a nice low interest on your loan applications. You also need to double check your budget to be very sure that it can still accommodate a new monthly payment. This is not just a one time payment because a loan is a long-term commitment and could take a few months to a couple of years to pay off.
Borrowing money from family members and even friends is not a bad idea but you always need to remember that there will always be risks involved. Regardless how close your relationship is with that person, money can change that and you must always take that into consideration before approaching them for financial help.