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Should You Consider Borrowing from Friends and Family?

"Neither a borrower nor a lender be." These famous words came from Polonius, Shakespeare's chief counselor to King Claudius in Hamlet.

When times are tough and money is tight, you end up having limited options of where to turn or to whom to turn to take loan to meet your requirements. If your credit score is good, and you know where to approach and you have enough time and securities, you may approach conventional banking system to get your loan. However and unfortunately, people have many challenging experience of borrowing money from such systems, either numerous visits and followups or high demand of security or high interest rate and processing fees and even after that many a time, at last moments your loan applications being rejected. Rejections after few weeks or months. Your financial needs have a challenge of being taken care within the stipulated time. Your children education or wedding of family members or renovation of house cant wait for unlimited time.

Another quickest path to get your hands on some much-needed money is to go a friend or a family member and ask for a loan, there is no certainty that you will get the support. And then there is challenge of social stigma, taking loan from family members and friends has its own social impact. Borrowing and Lending among friends and family can lead to a situation in which each party's idea of how much money is involved and when the money should be returned differs.

Money plays a funny role when it is passed between family and friends, especially if you are the one borrowing from or lending to a member of your family or a friend. The main advantage of receiving a loan from a friend or family member is that your "lender" is more likely to be flexible about payment arrangements. Also, when you borrow from a loved one, you often can borrow 100% of the required amount and enjoy lower interest rates (or no interest at all). The most unfortunate part of borrowing from someone you know is that your personal relationship could be damaged permanently if the situation goes south. Half of people have seen a friendship end because of money owed. The world is full of uncertainties, if you are not able to pay in time, such borrowings may cause impact on your relationship with lenders, who is your near and dear. Many a times, such borrowings break the relationship and leave scars for lifelong, not only for the borrowers and lenders but for the entire associated family members.

Below are some of the reasons why borrowing or lending to family and friends is not a good idea :

  • May ruins relationship forever, especially when there is delay in payment
  • It may go against your's and your family's members reputation and social standing
  • You can't do much if the money is not paid back to you

Advantage of borrowings from friend and relatives :

  • Borrower gets easy approval, they know each other closely.
  • Money come at low interest rate.
  • Interest stays in the family instead of going to a bank.
  • Since they are fully aware of your situation and financial standing, they might be more willing to extend the term, giving you more time to pay your debt.
  • Lending to your loved ones also becomes easier as you know that your money is in save hands.

One can implement some ground rules below borrowing or lending in the family to avoid possible conflict :

  • Understand that this is a loan, not a gift.
  • Set terms that both sides agree - make it clear and explicit.
  • Set up some paperwork and draw up a written agreement.
  • Work out a repayment schedule. Mention a time frame within which you want the money back and how much needs to be returned monthly.
  • Make payments on time.

There's no guarantee a family loan won't bring disappointment and conflict,but that won't stop us from helping the people we love the most. If you agree to lend money to family or friends,having a plan is the best thing you can do. Make sure proper guidelines are not followed below lending or borrowing one could lose both money as well as relationship. Make sure that its done in a right way or else consider the loan as good as gone.

However considering the challenges involved in borrowings from friends and relatives, one may also explore the new edge lending platforms like P2P (Peer to peer) lending platforms, wherein one can get loan without security and much of paperwork at a competitive rates. If all papers are being given and the borrowers have good credit history, loan can be expected between 3 - 5 days from application. This help borrowers to avoid any possible conflict and social stigma of borrowings from friends and family and they can keep their head high in their family and society, because such loans from P2P lending platforms are the transactions between the borrowers and the lenders through platforms. One such platform borrowers may explore is

Equally good for the lenders, in-spite of giving money to friends and family members and later on find challenges of recovery and loss of valued relationship, they may lend their hard earned money to good quality borrowers through the P2P lending platforms, like to get much higher rate of return with an assurance that their money is being managed professionally and lend to high quality borrowers. Each of such platforms have to run their business professionally and strictly as per the RBI's master guidelines.

The author is Credit Analyst of The article written by her is in hers personal capacity and educational in nature. All the views are her personal views., the peer to peer lending platform has placed (promoted) the articles to benefit the general borrowers and lenders. You may write to author for your quarries at referring the article name and your details. is one of the India's RBI (Reserve Bank of India) registered NBFC-P2P, providing technology enabled e-commerce platform to it's Lenders and Borrowers to avail their loan at a highly competitive Rate of Interest, in a hassle free manner without much of documents; at the same time it provides its Lenders Higher return on their capital by providing opportunities to lend to good quality, well assessed borrowers.


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