Borrowing from friends and family

1. Only borrow from a friend as the last resort!
Only borrow money from friends and family as a last resort. Also, if you do make sure you have planned how and when you are going to repay it. If you borrowed from the bank you would have to do the same, so don’t give your friends less respect than a financial institution.
2. Make sure that you pay interest.
It’s only natural that friends and family will want to help you in difficult times. However, if they loan money to you interest free it’s a gift from them rather than a loan. If you have to borrow money from friends the most important thing is to pay interest. Based on current savings rate you should pay at least 2%.
3. Don’t haggle.
If your trying to raise £10,000 from a friend and they only offer you £2,000 don’t ask for more, as this is what they are prepared to lend you. If they ask for an interest rate of 10% and you think its too high again don’t negotiate, just evaluate all options and decided if the loan would fit your needs. Friends aren’t normally greedy so just be glad they have offered to lend you something.
4. Set up your loan repayments and documentation.
The most important thing to do is set up a loan repayment schedule when borrowing money and make the lender aware of it. Make sure you make the payments on time, and if you can set up a direct debit so you know that it is paid. A legal agreement maybe a requirement of the lender or they may just want to keep it informal. Either way accept the terms of the lender. Remember it’s not just a loan arrangement; it’s a personal relationship that you have to protect as well, so make sure you stick to the agreement.
6. Pay the loan off early if you can.
If you can, try to pay the loan off early. It is very likely that whoever agreed to lend you the money will have lent what they were prepared to lose. However, this shouldn’t be an excuse to delay repayment longer than necessary. Early repayment will win back some points you may have lost, and shows that you are a person of your word.
7. Return the favour if you can to others in need.
Remember those who have helped you, it may be that some day they need your help too. If you are in a financial position to help others then do.
8. Make sure your friendship doesn’t become all about the loan.
If you borrow money form a friend, make sure it doesn’t end up all about the money. Keep your friendship going and make sure you do the things together you always used to. A bank is a faceless institution but a friend should be a friend for life.
If borrowing money from a friend doesn’t sound like your cup of tea why not try AtPledge. We’re friendly but will always s keep everything on a business level so you won’t be losing a friend. Call us now on 0800 810 111 or contact us online.