The Pros And Cons Of Borrowing Money From Family
June 7, 2022 | Emma Frost
Thanks to life's many curveballs, you'll probably find yourself considering borrowing money from family at some point. Whether through job loss, unexpected health issues, or broken-down vehicles, borrowing from relatives might be the easiest option. After all, they probably won't charge interest and will be flexible about repayments. But it can come with social awkwardness and more.
In the rest of this article, we'll explore the pros and cons of borrowing money from your loved ones before giving you an alternative if the disadvantages outweigh the advantages in your situation.
Advantages Of Borrowing Money From Family
A few pretty obvious positives of borrowing money from family are:
You'll be able to negotiate much more attractive payment options and agreements. They're your relatives, after all!
Conversely, when taking money from a financial institution, providers will often demand collateral and mandate regular, unchanging repayments. If you default, you'll have to contend with extra penalty fees, late charges, and potential legal action. Ultimately, it can negatively impact your credit score and tarnish your financial environment.
2. Longer Repayment Terms
Since your family member is more likely to be accommodating, they may give you longer to repay the loan.
However, make sure you're transparent if you reach a point when you can't repay the amount you owe within the pre-defined period. Ignoring or avoiding them will only trigger resentment and may irreparably damage your relationship.
3. No Interest
Whenever you get a loan from a bank, you'll have to pay interest. That's just the way it works. Sometimes, interest rates can be exorbitantly high, making repayment trickier and becoming debt-free a majorly uphill battle.
When borrowing from relatives, however, they might waive interest fees. In other words, you'll only need to repay the specific amount borrowed.
4. Helping Loved Ones
Asking for money from a family member probably isn't your idea of a good time. You might feel like a failure and carry shame. However, allowing yourself to be vulnerable in front of those who love you is often a way to strengthen bonds. Plus, many people feel good about helping their loved ones out of difficult financial situations.
Disadvantages Of Borrowing Money From Family
Unfortunately, you don't get the good without the bad. Read on as we discuss the disadvantages of borrowing money from family:
Whoever lends you money won't want to constantly remind you about the debt and inquire when they can receive the next installment. So, actively keep communication channels open to alleviate this awkwardness. If you don't, anger and resentment will soon ignite.
2. Relationship Damage
Some people might feel duty-bound to lend relatives money. Others might agree to the loan but put themselves in a risky situation of their own by giving you money. These scenarios can result in relationship breakdowns.
3. Unclear Terms
Naturally, loans between family members are informal, meaning they don't typically involve paperwork. While expected, it can result in a lack of clarity and misaligned expectations between you (the borrower) and your lender.
4. Tax Problems
As your loved ones will be eager to help you, they will probably relinquish the money without considering their tax liability first. Insufficient documentation can be a cause for IRS concern. After all, loans and gifts carry different tax implications.
To combat this otherwise dicey situation, ensure your familial loan is carefully documented. Try to follow the steps traditional lending institutions take, so both parties are protected.
Don't Want To Borrow From Family? Try Installment Loans
If the negatives outweigh the positives, you can acquire money in a pinch through installment loans. All you need is an ID, proof of income, and a blank check from an active account open in your name to borrow up to $1,500!
Our straightforward process is as follows:
- Complete the online request form. It sends your information straight to your nearest Nevada Title and Payday Loans, Inc. branch.
- Pick up the phone when one of our loan representatives from your closest Nevada Title and Payday Loans, Inc. storefront. They'll tell you about the process, ensure you have the necessary documents, and answer your questions.
- After the call, head to your local branch with your state-issued photo ID, proof of income, and a blank check from your active checking account.
- Upon your arrival, one of our friendly associates will verify your documents to determine whether you qualify for the loan.
- If you gain approval, complete the simple paperwork with the representative's help.
- Finally, receive the money you need on the same or the following business day.
Get Installment Loans Today!
When borrowing from family is too much of a strain on your relationship, get installment loans from us at Nevada Title and Payday Loans, Inc. The process is quick and straightforward, allowing you to fund your emergency in 24 hours or less.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.