Are you facing financial difficulties? Are you worried about your ability to make ends meet in the months to come?
If you find yourself in this position, you might look for ways to earn additional money (such as a second job). At the same time, you might realize that you need a loan in order to get through this rough patch.
Borrowing money from family is an option to consider. However, if you don’t take the right approach, it could cause more harm than good.
Reasons to Borrow Money from Family
There are many situations, often unplanned, that could lead you to discuss getting a loan from a family member (typically a parent or sibling), such as:
- Auto or home repairs
- Illness that leads to out-of-pocket medical expenses
- Personal issues, such as divorce
While any of these circumstances could turn your financial life upside down, this is no time to panic. Instead, consider all your options for staying afloat until you find a solution.
Here are three reasons why many people turn to family when they need to borrow money:
- It’s fast. If you want money now, and you know a family member has cash to spare, you might believe that this is your best option. Once the person agrees to lend you the money, it can be in your hands within a matter of minutes.
- It’s efficient. There is no paperwork to fill out. There is no documentation required. Instead, your merely discuss your situation with your family member, agree to the loan amount and when you might be able to pay the loan back.
- Less stress. Unfortunately, many people borrow money from a family member with the idea that they don’t need to repay the funds in full and/or in a timely manner. Taking this approach can remove stress from the borrowing process, despite the fact that it puts your family member in an awkward position. And, eventually, it may ultimately the awkwardness may become stressful.
The Problems with Borrowing Money from Family
By now, you may have come to the conclusion that borrowing money from family is the best thing you can do. Before you travel down this path, consider the following;
- It can cause conflict. If you repay the money in full in a reasonable period of time, both you and your family member will probably be satisfied with the end result. On the other hand, if you neglect to live up to your end of the bargain, it can lead to a conflict that is difficult to overcome in the future.
- Lack of terms and conditions. When you borrow from a financial institution, there are terms and conditions you must follow until the loan is paid off. For example, you’re required to make a minimum payment each month. When you borrow from a family member, it’s common to do so without setting terms to protect both sides. This has a way of causing trouble in the future.
- The loan may be put on the back burner. As you work through your financial struggles, it’s only natural to allocate your money to your most important expenses. If you don’t consider this loan important, you may find yourself missing payments. As a result, your relationship can begin to deteriorate. Plus, not having a clear payment schedule and target payoff date as you would with a personal loan could also cause payback lethargy, which leaves debt hanging over your head.
Review Alternative Options
Rather than borrow money from family, it could be in your best interest to consider an alternative option for getting your finances in order.
A personal loan, for example, allows you to manage debt without bringing your family into the equation.
With a personal loan, you work one-on-one with a financial institution to find the solution that best suits your current situation. Discover Personal Loans has 100% U.S.-based customer service ready to help you from start to finish.
Once you’re comfortable with the terms and conditions, you can move forward without any concern of souring a relationship with a loved one.
As tempted as you may be to secure a loan from a family member, you shouldn’t do so unless you are comfortable with the risks. When you compare the potential downfalls with the benefits of a personal loan, you may soon find yourself wanting to keep family out of your financials and contacting a reputable bank, like Discover, instead.