Borrow Money From Relatives and Friends or Ask for a Loan?

Our life is unpredictable and this makes it very interesting and enjoyable. Of course, some of life's twists and turns may bring challenges and negative experiences. Money challenges are the most unwanted and it is very difficult to easily bridge them.

Modern economy suggests many options which help people in money need to solve their financial issues. You can go to the branch of a bank or a credit union, or you can even apply for payday loans Ottawa online wherever you are. Taking out a loan is much simpler then as it seems. But what to do if your friends or relatives don't want to take a loan, but ask to borrow money from you?

Borrowing Money from Close People or Banks?

Even if you make necessary estimation and calculation and decide that you are able to easily repay the loan together with the amount of interest it doesn’t mean that the bank will give it to you. You need to have a good credit history and to be lucky to turn to an honest and reliable lender in order to close your money issue without additional challenges.

Such an uncertain situation pushes people to borrow money from relatives and friends. Besides, the borrower hopes to get a much lower interest rate, better terms and no hassle with a credit score. But what if you are the one who is asked to lend money?

Of course, you can’t refuse from helping your close relative or friend especially when you possess the necessary amount of money. But on the other hand, you can’t be 100% sure that you will get this money back on time. Besides, people who are turned down by official financial organizations are not treated as reliable borrowers and this is alarming. So, it is the right time to think of ways to minimize the risk of not getting the lent sum of money back.

Ways to Safely Loan Money to Friends or Relatives

1. Make an Agreement

Even if you 100% trust your borrower it is better to create a written agreement. Thus you will clarify terms and conditions that it is better for both of you. The borrower will treat the deal more seriously and you will not be bothered with uncertainty. Don’t be afraid to suggest the written deal. Just explain that all money issues should be treated seriously and it is important for you to feel the distinctness. Besides, you may assure the deal officially and this will help you to avoid many of the possible problems in case your borrower refuses to give you the money back.

2. Negotiate About Interest Rate

It is not wise to lend interest-free money even to close people. You need to understand that 100 dollars today and 100 dollars in three years is not the same amount of money. This is called inflation and that means that you will be able to buy fewer things for the same amount of money after some time. You can find the inflation rate value on official sources and include it as an interest rate into the deal. In fact, you will not gain any profit but you will not lose money at least.

3. Be Careful With Co-Signing a Loan

Co-signing a loan is also one option which may be used in order to bridge the money need. That means that you co-sign a loan with somebody and thereby become responsible for the loan repayment in case the second party fails to do this. Yes, you will have to return the whole amount of the loan with accrued interest and fees. Otherwise, you will be held liable for the situation and your credit rating will be spoiled. So it is very important to think carefully when co-signing a loan.

It is great to help people who are close to you but don’t forget to do it wisely.