5 Reasons Why It’s Better to Borrow from Lenders than Family Members
You’ve just spent your salary on your rent and other household expenses, when suddenly your car dies and needs a new battery. You’ve finally paid off all your bills, but then realise it’s your mom’s sixtieth birthday and you simply must give her a gift. You’ve spent for everything to get your house remodelled – but now you need money to be able to spend the night elsewhere while the remodelling is going on.
These types of situations can happen to all of us and they can happen unexpectedly. And during these situations – when we are in dire need of fast cash – it can be extremely tempting to turn to those closest to us, our family members and friends, for financial help.
But family and friends are not financial institutions, and it’s definitely not a good idea to borrow money from them. While there may be benefits to borrowing from them such as convenience, the open-endedness of loans and the flexibility of repayment, there are several more reasons why you’d be much better off borrowing from an established lender like Money3 than with the people around you:
- It can become personal very easily and emotions can get involved in the transaction. While this may have its perks, it has its downsides. For instance, your family member may lend you money because of how close you are already; but on the flipside they may not lend you the money because of some things you’ve done in the past that have nothing to do with how trustworthy you are when it comes to handling loans and money. Or they may lend you a significant amount for personal reasons, not really taking into account that you may not have the capacity to repay that much in a short span of time. They may also demand the full amount the moment you have an argument, or constantly remind you of your debt every time you meet. This could not only lead to some serious financial trouble, but ruined relationships as well.
- Your reasons for borrowing will be scrutinised. It’s normal for lenders to want to know what your loan will be used for if it’s a significant business loan. But for fast cash loans and other small personal loans like the ones here at Money3, there’s really no need to delve into what you’ll use the loan for. Your reasons for borrowing don’t have to become the basis for whether or not you can get the loan.
With family members or friends, it can be a different story. They may or may not lend you the loan depending upon what you’ll use it for. And in some cases, they may have to benefit from what you’ll use the loan for.
- It can become unprofessional really fast. Without official documentation, squabbles can easily ensue. You’ll start arguing about the agreed interest rate, when you were supposed to pay the loan, where the loan is going or what it’s being used for. Before you know it, you’ll be at a cousin’s birthday party having a heated discussion about your loan, ruining every family gathering and becoming known as the black sheep in the family.
- More often than not, you’ll have to repay more than you owe. Most people think that borrowing from friends or family members will be cheaper, but in most cases, the opposite is true. If you borrow money from family, you have to make the terms sweeter. You may have to add a little extra to the agreed interest, let family members have a part in the investment venture you are undertaking, or do favours for them. Why is this, you ask? Well think about it. You don’t want them to feel bad about giving you a loan, and you want to maintain the relationship you have with them. This means going the extra mile and giving or doing more for them for the sake of the relationship. With a lender, you don’t have to pay more than what you owe or be concerned about how the lender is feeling. You don’t have to do them any special favours, you just need to fulfil the repayment plan as agreed.
- It can be terribly unclear. What usually happens with borrowers and lenders who are family or friends is that they can be stuck in a limbo. The lender may feel obligated to lend you more than he can spare because you are close, and he may not even mention a deadline or interest rate out of consideration of your closeness. The loan may become the least of your priorities; in time, you may even mistake it as a gift. The result of this lack of clarity may just be a lot of hurt feelings, misunderstandings and broken relationships.
Borrowing from a family member or friend may seem like the easier way to get out of a financially sticky situation, but this kind of transaction can get complicated very fast. To make sure you never have to put your relationships at risk, better approach a reliable lender like Money3 instead.