Why You Shouldn’t Borrow From Family

If you are facing a financial hardship and find yourself wondering where you can turn for assistance, think twice before turning to your family or friends. While your loved ones may have the best intentions in mind when lending you money to help you through tough times, this help is often the root of future problems in the relationship. Here we look at three situations when borrowing from family isn’t the best option available.

• Family members are dealing with financial difficulty themselves: In these tough economic times, you don’t have to go far to find other people dealing with the same hardships as you yourself are currently facing. Nevertheless, many family members or friends who are really not in the position to lend money will do so to help a loved one. This not only further deepens their financial hardship, but is also likely to lead to hard feelings at some point down the road.

• You are unsure as to whether or not the money is being gifted or loaned: Can you imagine the problems that might develop in your relationship if you mistakenly accept what you believe to be a gift, when it is actually a loan? Both parties may feel mislead which can be devastating to the relationship. For this reason, it is imperative to put something in writing whenever money exchanges hands between friends or family. Not only will the borrower have terms that they can understand and be held accountable to, but the lender also has some proof as to the nature of the transaction.

• You do not believe you will be able to repay the loan: When a loved one offers to help you out of a tight spot by loaning or gifting money, they generally do so because they care about you and want what is best for you. With this in mind, you should also have the same respect and return the courtesy when you are in a position to do so, or if there is an official repayment arrangement, per those terms. If you do not see yourself being able to repay the debt, it is better to pass on the offer of assistance and look for help outside of your circle of friends and family. Banks and other financial institutions can and will take legal action to recoup outstanding debt, where a loved one may not have those same rights. Better to deal with a debt collector than having to face Aunt Mary empty handed at every holiday or birthday party.

Dealing with debt is stressful and frustrating on the best days. While a loan from family members or friends may seem like your salvation, choosing this route could very well cause more problems in the future, problems that can last long after the debt is repaid.