You could borrow money from friends or relatives to pay off your debts. But, is it a good thing to do if you are currently struggling to pay back your debts? Remember, your friends and family should not feel obliged to lend you money no matter how bad your financial position is because it could put them in a similar situation.
Additionally, is this source of money better than other debt relief options such as a debt consolidation loan or a debt management program? The following are some ideas that you can use to decide whether you want to bring your friends and family to help you get out of debt.
Pros and Cons of Borrowing Money from Friends
The great thing about using money borrowed from those close to you is that you will get money quickly and sometimes you won’t need to pay interest and late fees on that money.
But there is also a chance that you are asking them to fork over cash that they don’t have. What’s more, if you cannot pay that money back when they need it you might lose friends or cause family strife.
Things to Consider Before Borrowing Money
When you consider raising cash from friends or others who love you it is important that you honestly disclose your financial situation up front. Let them have a look at all your budget and if possible, ask them to help you work out a repayment plan for their loan. This will help them understand your ability to repay and decide whether to lend you money.
Also, be sure to arrange an agreement that could be beneficial to both parties in the deal. Just find a person who has excess funds where you can pay him or her interest for the use of those funds.
This will let you enjoy a lower rate than you could get from any of the commercial lending institutions and the person could also get a better return than they would get by investing the money in those financial institutions or at the bank. If your friends and relatives trust you chances are they are willing to earn a little more interest on their money.
However, if you have any doubts of paying back the money instead of borrowing money from friends consider getting a loan from a reputable commercial lender. With a low-interest loan you can settle your debt and save your personal relationships too.