Borrowing money from family and friends can seem like an easy way to access some money if you’re in a tight spot. However, borrowing from family and friends does not come without potential complications. If things go wrong and you are unable to pay you could risk hurting the people around you and damaging relationships.
Many people turn to a friend or family member in a time of need and choose to borrow money. During the pandemic especially, more and more people turn to family and friends for financial support to stay Afloat.
In October 2020 it was estimated that 5.9 million people borrowed from family or friends during the Covid-19 pandemic, according to The Financial Lives Survey, carried out by the Financial Conduct Authority (FCA).
Borrowing from friends and family might give you the money you need to tide you over until the next paycheck or offer support in a financial emergency, but is it a good idea?
There are many things to consider when it comes to choosing to pursue an informal loan from a family member or friend. Is important that you have some understanding of whether your friend or family member can afford to lend you the money you need.
You don’t want to be the reason that another household is struggling financially. It is also important that you have made a clear plan for how and when you will repay the loan and how difficult this will be for you in your current financial situation. Knowing these key points will make your decision a lot easier.
If you’re planning to borrow money from a friend or family member there are a few important things to think about first. Consider the size of the loan you need and draw up a mutually agreed-upon repayment plan. Make sure this plan covers all eventualities. Consider what happens if payments are missed, paid in part or even if somebody dies. Make sure this agreement is written up and both parties have a copy.
Of course you do. There are many options when it comes to borrowing money. Get in contact with your bank to see what loans might be available to you. You can also contact a financial planner to help you make the best financial decision for you. If you don’t have a good history when it comes to borrowing or you have a poor credit score, there are still options, you could look into something like a payday loan to cover those unexpected financial emergencies.
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