Should You Borrow Money from Family?

There will be many occasions in life where you need a little extra help to pay for things, whether you are attending college, purchasing a home, or starting your own business.  And while there are plenty of ways to get the cash you need (applying for bank loans, using credit cards, or seeking out partners or investors), you may find it necessary to turn to your family and friends in a bid to get the money required to meet your personal goals.  After all, these people are invested in your future, so why wouldn’t you ask them for help?  There are certainly a lot of benefits to borrowing from your family rather than other sources.  But there are also drawbacks to such a proposition, and you need to consider both the pros and the cons before you hold out your hand.

For starters, there are a lot of reasons why you may want to borrow money from those that are closest to you.  For one thing, they won’t do a background check (although most of them are probably aware of your spending and saving habits).  So if you find yourself saddled with bad credit and unable to secure a loan by normal means (through a bank, for example), this could be an attractive option.  In addition, your family may be willing to give you money (if they have it) with fewer restrictions.  Although family members will certainly want to be paid back, they may not demand any interest at all and they are sure to be more lenient when it comes to a repayment schedule than most other types of lenders or investors.  And of course, there is the fact that your family and friends love you.  Because they likely want to continue to have a relationship with you, they are bound to be more flexible with the conditions of any loan.

All of these are great reasons to borrow from family and friends.  Unfortunately, there could be some very big drawbacks associated with such loans, as well.  Have you ever heard the phrase “never mix business with pleasure”?  Well, borrowing money is a business proposition and borrowing from your family falls decidedly under the “mixing business with pleasure” category.  When you take a loan from a friend or family member you are tempting fate, especially if you don’t know if you can pay back the money.  Any failure on your part could result in angry feuding, family members that find themselves in financial trouble (because they were counting on you to pay them back), or even a rift in the family because of your broken promise.  So unless you want to risk destroying close relationships, you need to think twice about going this route in order to get money.

Plus, there are so many options for loans these days that you should never have to approach your family for a handout.  Homeowners can look into home equity lines and others can try to secure personal loans or even payday loans in a pinch.  And while the terms of these funding options may not be favorable, at least you’ll have a couch to crash on if you default (because you won’t have burned all your bridges by borrowing from family and friends).