Many of us have needed access to extra funds now and then. We are put off at having an extra cost associated with borrowing, as that’s how it always works. Or does it? Because do you have to use a financial institution to access funds? We ask – is borrowing from friends or family a good idea?
Borrowing From Friends Or Family -The Advantages
There are numerous advantages to borrowing money family and friends. Let’s look at a few. Firstly, by removing official processes, the transaction has a more informal feel to it. You not need to provide evidence that you can make repayments, and you do not have to jump through hoops. It is an easier process all round. Secondly, the process does not require credit checks or a healthy report. It simply needs one person to agree to do it and hand over money. If you get over the awkwardness of asking, someone close to you is more likely to accept the request for funds.
Other Pros
The convenience of such an agreement cannot be understated. The lender is quite likely to know the financial situation of the person asking for money. They can do their own instant check in their head. An instant decision can be made. In theory the whole process can last minutes. There is no paperwork, no small print, no long lists of terms and conditions. There is also more flexibility over the contract to repay.
Borrowing From Friends Or Family –
No Interest
The obvious advantage is that the family member or friend is rather unlikely to charge fees or interest on the transaction. If you borrow £200, that is probably what you will end up paying back.
Borrowing From Friends Or Family –
Repayment Struggles
You can mark such a situation under pros and cons for lending off a close friend or family member.
In the event that you are unable to pay your dues on time, you do not have to worry too much about the consequences. You just need to talk to them properly and assure them that you will be able to pay on time next time. However, not meeting payments can put a tremendous strain on relationships, and this is the major risk you take by borrowing from those you love.
Other Disadvantages
This does not apply to everyone of course, but some may see friends and family as a bank they turn too when needed. With a full official application for a loan, you have to jump through hoops for a reason. The process ensures that both sides are confident that a loan is thew right move. That both understand what is involved. It makes you consider what you are doing and change your mind if you have doubts. With friends lending you, it can be dangerous to get into a certain mindset. One that thinks there is money “on tap” when you desire it. And it is also easier to build up significant debt when it is easier to obtain. And this again can wreck relationships if the money is not there to pay it back.
