The propensity to borrow from friends and family has significantly decreased due to the simple availability of institutional loans with reasonable payback arrangements. Nevertheless, it’s still a common option when we fail to obtain a loan due to poor credit scores, past defaulted debts, or any other cause.
There may be friends and family members who are glad to assist in our time of financial need. However, you need to consider certain consequence possibilities before requesting their assistance to borrow money. Let’s look at some of them:
Low or no interest component
While taking a loan, the rate of interest is an essential consideration in deciding on a lender. However, when borrowing from a friend or family member, interest is not typically mentioned. Both parties appear to agree that interest is either not paid or charged as an informal sum. So, with this kind of loan, the lender is likely to lose some interesting revenue.
Vague repayment terms
This is a significant characteristic of loans obtained from friends and family. It is frequently not feasible to put the terms in writing when you borrow from them. Such borrowings are frequently completed quickly over a cup of tea and a shaking of the hand.
It is common to obtain a loan from a bank and then visit the same bank a few days later. However, there will be a subconscious sense of obligation when we encounter a friend or family from whom we have borrowed money. You are likely to say at least once that you are working towards returning the loan and that it is on your priority list.
Inability to pay at their moment of crisis
If the person you borrowed from is ever in need of money, you may be confronted with the position of being unable to assist them in return. It’s very conceivable for your friend or family to experience an unforeseen financial problem of their own shortly after they give you money. Having accepted the loan for a legitimate reason, you may already be broke by the time your buddy comes up to ask whether you can return the money sooner than planned.
Risking the connection
Whenever we borrow – or simply ask about borrowing – from our friends or family, we face the danger of alienating them. Owing money may damage the purest of friendships. There are numerous emotions at play when we engage with someone to whom we are financially obliged. We shall examine many extra factors before talking to them and vice versa. In other words, bringing in a financial aspect to a relationship may complicate it, sometimes permanently. The fact that you had accepted a loan from a relative may be enough to strain the connection if it is revealed carelessly in a casual chat years later.
Is there a better option?
One such possibility might be applying for Bank Personal Loan. Its advantages include, among many others, verifying your loan eligibility online in one minute and loan disbursal in one working day after you submit your papers.