Lots of families go through periods of time when they require a bit of financial help. What I wasn’t aware of was just how many borrow money from friends during these times. Did you even know that was a thing?
The problem is, while there are a lot of benefits involved with borrowing from friends instead of banks, building societies, and traditional lenders, there are also some risks to be aware of too. Here, we’re going to look at some of the pros and cons associated with borrowing from your buddies, before you go down that route.
The Positives of Borrowing from Your Friends
Apparently, one of the main reasons that people prefer to borrow from their friends instead of financial companies, is that they know they probably won’t have to pay interest on the money they borrow. While your friends will expect you to give them the money they gave you back within a reasonable time frame, the chances are that they won’t ask you to pay an interest rate depending on how long you borrow for.
The lack of interest and the less formal nature of the lending means that you’ll find yourself under less financial pressure during the borrowing period. This means that you don’t have to worry as much about the stress of a loan. In fact, your friends may even offer you the opportunity to “pay it back when you can”, which means that you have as long as you need to make the necessary repayments.
Making the Most of Trust
“Trust” is what makes borrowing from friends and family so effective. Your friends trust you to pay them back on time, so they don’t have to hound you like a bank or credit union. While another professional finance company has no idea how you’re going to act with the money they give you, your friend has probably spent years getting to know both you and your spending habits.
The problem with this is that taking advantage of a friend’s trust can lead to serious problems with your relationships. After all, while your friend might be patient with the money they give you, there’s a good chance that they will expect you to pay it back eventually. If you end up taking liberties with your friend’s money, or constantly avoiding repayments, then your relationship will start to crumble.
This brings us to the negative side of borrowing money from your friends.
The Risks of Borrowing Money from Friends
Perhaps the biggest risk of borrowing money from a friend is that if you can’t pay back what you owe on time, or you keep pushing your luck with your pals, then there’s a good chance that you’ll end up losing your friendship. This can lead to a great deal of stress as you end up having squabbles and feuds with people you care about.
You should never borrow money from someone you love without the full knowledge that you’ll be able to pay it back. Remember, borrowing from someone you care about means that you owe that person, and this can lead to feelings of discomfort and resentment over time. Even if you are making payments as you should be, your relationship could begin to suffer because you wish you didn’t have to pay the cash back.
There’s Less Stability When Borrowing from Friends
Another thing to keep in mind when you’re considering borrowing from friends is that most people will only be able to offer you the money that they need if they have the cash to spare themselves. Of course, life is unpredictable, and someone might lend you money one day, and then discover they need it back the next.
If your friend ends up facing their own financial hardship, they may need to pressure you to give the money back quicker than you expected, and this could once again lead to rifts in your relationship. If you can’t pay the money back on time, then you may need to watch your friend struggle and suffer, which can be emotionally draining too!
Generally, it’s a better idea to simply look for a loan solution that suits your needs. This way, you avoid the risk that comes with borrowing from friends, and you can make sure that your important relationships stay strong.