Borrowing money is not an easy decision to make – it is a very important one. Before borrowing money, determine first if the loan is absolutely necessary, or if saving up for it is a better option. Once you have decided that you do need to borrow money, the amount that you need to borrow is the next decision you will be making. Interest rates, the schedule you need to repay, the length of the borrowing term, and some additional costs are things to consider, too. Now, the big question is: Should you borrow money from your friends and family, or should you opt for the banks and other lending institutions instead?
Borrowing money from friends or family is easier done.
When you borrow money from someone you know personally, you don’t really have to prove on paper that you are capable of paying the debt back – not like when you borrow money from lending institutions or banks. Your friends and relatives will most likely be willing to lend you money, especially if it’s for something that will be put to good use.
Borrowing money from friends or family will provide you the exact amount you are borrowing.
When you borrow money from someone close to you, the tendency is for them to give you the money you need in full. Unlike typical loans, you will be able to get the money without any deductions. Borrowing from lending institutions or banks will definitely have some deductions on the money you are borrowing from them. Sometimes, these institutions even require a collateral payment of some sort.
Borrowing money from friends and family might bring about personal conflicts.
One of the drawbacks of borrowing from someone you know is the fact that they will have a better idea of your financial standing. If you will be borrowing a large amount of money, they will be looking at your lifestyle as well as your financial standing – which only leads to you being chastised for your reasons for borrowing money.
Borrowing money from friends and family might raise some questions.
When you are borrowing money for your or your family’s needs, or if you are going to use the money to fund a business venture, you would probably hear them ask you why you did not save up for it. This is what makes it different from borrowing money from someone you know over banks and lending institutions. You just have to prove that you have a good credit score, and that you are also capable of paying on time.
Borrowing money from friends and family causes trust issues.
Trust is put on the line when you borrow money from someone you know. The moment they lend you money, they trust you to pay the amount you owe them within the period you agreed upon. It is both important for both parties to remain trustworthy at all times. Failure to do so will only lead to irreparable conflicts.