We’ve all been in a tight bind before. The sort of bind that leaves us with nowhere to turn but our loved ones for financial help. There aren’t many of us who haven’t borrowed from family or lent to friends. If you find yourself in this situation, is it really the best route to go to borrow money from family or friends? Are there factors involved you might have looked over? Here is a list of the pros and cons of borrowing from loved ones.
I’m not a very big fan of borrowing from loved ones, but ultimately, you have to make your own decision. What works for you may be different from what works for me, but the pros and cons of borrowing from family and friends are always going to be similar:
Pro:
Potentially no interest to pay back. Yep, it’s far cheaper to pay back your forgiving mom than a high-interest loan or credit card.
Con:
You could harm your relationship with your loved one. Of course, none of us intend on being unable to pay back a loan from our friend, but life happens and things can slip from our grip. Will your relationship survive the stress of being unable to pay back what you owe?
Pro:
Dad might choose to overlook a late payment or two. If you’ve got forgiving family members, paying back what you borrowed may not be on such a strict schedule like loan or credit card minimum payments.
Con:
You could end up putting someone you care about in a tight spot. Maybe they felt they had no choice but to lend you the money and it left them short, or maybe you’re unable to pay it back by a time they need it.
Pro:
No credit check. Your family isn’t going to run a credit check to determine if they should lend to you like other lenders might. It is likely to be much easier to get a loan from mom and dad with poor credit.
Con:
No credit reporting. If you borrow from your brother and pay it all back, plus interest on time, your good habits are not going to benefit your credit score.
Ultimately, the most important questions revolve around how much this could damage your relationship with someone you love. Is it worth it? Have you considered all the options.
Here’s an option you may not have thought of: get a secured savings loan. You don’t need money up front, and just about anyone gets approved. Your hard work paying your loan down will boost your credit score, and when all’s said and done, you end up with a nice chunk of cash. For more information on Refresh Financial’s secured savings loan, click here.
What do you think? Is borrowing from loved ones risky? Let us know in the comments!
† Financial Implications - Across Canada (excluding Saskatchewan, Quebec, and New Brunswick) Refresh Financial offers Credit Builder Loans, provided by Refresh Solutions Inc. in fixed sizes ranging from $1,250 to $10,000, at a fixed interest rate of 19.99% APR with terms of either 36 months or 60 months.
Approvals - Approvals are subject to Refresh Financial’s review and underwriting guidelines which requires, ID & banking verification.
