Asking Cash from Relatives? Borrow from an External Lender Instead

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Borrowing Money From Family or FriendsAt a time when many of us are going through financial difficulties, there comes a point when borrowing money becomes necessary to stay afloat. But who to ask? The usual answer would be family member and friends.

We all have the best intentions when it comes to people closest to us. Often, we are willing to offer what we can to help each other out, especially in circumstances when we would never for a stranger. This also means, however, that the rules can be very different from when we ask for personal loans from a lending institution. Rapid Loans agrees that the potential challenges associated with it can be different as well.

Emotional Baggage

While the ties of family and friendship may seem strong enough to withstand such a simple transaction, sometimes the emotional baggage associated with money can be too much to handle. The set-up puts a price tag on the relationship.

Awkwardness During Family Gatherings

In addition, there is nothing worse than attending a family reunion or gathering with a strong feel of awkwardness in the air, or not attending at all because you want to avoid the relative who lent you the money.

Expectations from Both Parties

In addition, borrowing money from people closest to you may be the easiest option, but the set-up often comes with a set of expectations from both parties. For instance, if you are a business owner and needed the money for start-up costs, there could be an expectation with the lender asking for more involvement in your business affairs.

The Problem: It’s in the Informality

The root of the problem here lies on the informality of the transaction and the lack of concrete terms in the lender-debtor relationship. The solution here, therefore, is to make sure the terms are very clear — or better yet, borrow money from an external party instead. Lending institutions often involve agreements in writing, signed by both parties and includes the loan amount, the time frame, the interest rate and what happens in case of a default.

Borrowing money from a family member or friend is fraught with problems, to the point that it is often better to simply refuse the generosity even when it seems like the easiest choice.