Borrowing money from family is a lot easier than borrowing money from a bank. You don’t have to submit an application and you might not have to pay interest. However, borrowing from your family isn’t always a great experience. You may end up paying a lot more back in ways you never imagined.
It might seem natural to approach your family about borrowing money if you have a “normal” reason, such as buying a car, starting a business or catching up on your student loans. If you have reasons that aren’t so easily explained, or that you prefer not to disclose, it could get a little tricky. Your family will surely ask you why you need to borrow money, and you’ll be forced to either lie to your family or tell some uncomfortable truths.
Justifying Your Actions
Say you borrow $500 from your mom or dad because your car broke down and you couldn’t afford the repairs. You’re bailed out because you got your car fixed, but now you have to explain yourself every time you go out with your friends. Your parents will want to know why you’re spending money on leisure activities instead of paying them back or putting more into savings so you won't find yourself needing an emergency loan again. These questions aren’t unreasonable, but they could get old after a while.
Easily the worst case scenario that could occur when borrowing money is if you’re unable to pay back what you borrowed. This could create a serious rift within your family, one that could involve many people and one that could be very difficult to repair. These problems also could arise if you’re late in paying back an installment, if you turn to them for loans on a regular basis, or if you appear to be ungrateful for receiving the loan.
Sometimes borrowing from your family is a necessary evil, especially if you don’t have any credit history. Your best bet is to be as honest as possible with your family. Explain exactly how much you need and why you need it, and provide a rough timeframe of when they can expect their money back. If things go wrong with your repayment plan, honest communication is the best policy. Your family will be a lot more understanding if they know what’s going on than they would be if you just stopped paying them back with no explanation.
Bryan Berg is a freelance writer based in Long Island, NY. He has been writing since 2002 about personal finance, sports and parenting. He is a contributing writer to eHow Money and LIVESTRONG.COM. He has a Bachelor of Arts in marketing from Hofstra University.