Borrow Money from Your Family or Friends Without Ruining Your Relationship

How to Borrow Money from Family and Friends Without Ruining Relationships

Borrowing money from family and friends can be a convenient option when you need funds quickly. However, it requires careful consideration and planning to avoid straining relationships. This comprehensive guide provides tips on how to approach loans within your personal network responsibly and respectfully.

Borrow Money from Your Family
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Should You Borrow from Family and Friends?

Borrowing from family and friends allows you to access funds more informally than traditional lending sources like banks. It can also come with more flexible terms. However, the disadvantages need weighing up too:

Potential advantages

  • Quick access to cash without lengthy applications
  • Lower interest rates or none at all
  • More flexible repayment terms
  • Draws on existing goodwill and trust

Potential disadvantages

  • Can damage relationships if expectations aren’t managed
  • Social pressure replaces legal obligation for repayment
  • Less formal terms increase risk of confusion
  • Lender has no legal standing if you default

Before deciding, scrutinize your motivations and be realistic about repayment. Only borrow if you absolutely need to and have a solid plan to pay it back on time.

Exhaust Other Options First

Borrowing from family or friends should not be your first choice. First, thoroughly explore alternatives like:

  • Personal loans – Unsecured loans from banks, credit unions, online lenders. Though they require credit checks, they have fixed terms and rates.
  • Credit cards – High-interest but offer quick access to smaller amounts. Only for short-term borrowing if fully repayable each month.
  • Government assistance – Federal or state programs exist for everything from medical bills to starting a business. Research eligibility.
  • Employee benefits – Some companies offer emergency loans or salary advances to cover short-term needs.
  • Local community groups – Organizations like religious institutions and nonprofits may offer low-interest loans.
  • Peer-to-peer lending – Borrow from a pool of investors via online platforms. Offers more competitive rates than payday loans.
  • Crowdfunding – Creating a campaign through a crowdfunding website. Best for one-time concrete needs like medical bills.

Only once you’ve determined such options are unavailable or inadequate should you consider approaching friends or family.

Have a Clear Borrowing Purpose

Before asking for a loan, define:

  • Exact amount needed – Calculate precisely how much you need to borrow, including any buffer room. Don’t ask for round numbers.
  • Specific usage – State exactly what the money will be used for, like paying specific bills, tuition, or startup costs.
  • Timeframe – How soon do you need the money? Is it an emergency or can you plan ahead?

Being able to articulate your needs clearly engenders trust in your ability to handle the money responsibility. It also helps the lender determine if they can help.

Vague purposes like ???????help with bills??????? or ???????get me through the next few months??????? come across as reckless. You should also avoid borrowing for:

  • Luxury or unnecessary purchases
  • Speculative investments
  • Paying off gambling debts
  • Enabling any kind of risky, addictive or illegal behavior

Evaluate Their Financial Standing

Consider if potential lenders are in a stable position to lend without impacting their own finances. Look at:

  • Income stability – Do they have a steady, reliable income? Is it higher than average?
  • Existing debts – Do they already have a significant debt load or other financial obligations?
  • Savings and assets – Have they demonstrated a pattern of saving and investing? Do they have assets to liquidate if needed?
  • Recent changes – Has their financial situation changed for better or worse recently?

Be especially cautious borrowing from family or friends if:

  • They have unsteady freelance or gig economy income.
  • They already carry significant credit card, auto, or student loan debts.
  • They have minimal savings and investments.
  • They are retired and living on fixed incomes.
  • They were impacted by recent layoffs, pay cuts, or health issues.

While you don???t need to pry, don’t approach anyone who might struggle due to lending you money. Consider smaller asks from multiple sources rather than overburdening one person if needed.

Choose the Right Person

When identifying who to borrow from, consider:

  • Relationship closeness – Opt for immediate family or very close friends over distant relatives or acquaintances. The commitment should be reciprocal.
  • Comfort level – Will they empathize with your situation and want to help you specifically? Is your relationship strong enough to withstand any tension?
  • Stability and values – Mature, financially responsible individuals are most likely to be understanding yet firm about repayment terms.
  • Power dynamics – Avoid asking people you hold any authority over, like younger siblings or direct reports. This could be coercive.

Avoid borrowing from family and friends who:

  • You lack a strong relationship bond and history with.
  • Seem to judge or undermine you.
  • Enable or depend on you financially.
  • Are already resentful or jealous toward you.

The ideal loan comes from someone who cares about your wellbeing, wants you to ultimately become independent, and has the means to absorb the temporary impact.

Have a Concrete Borrowing Agreement

To prevent misunderstandings, create a formal loan agreement outlining:

  • Loan amount – The exact dollar amount being borrowed.
  • Interest – Will interest be charged? If so, define the APR. If not, state the loan is interest-free.
  • Payment schedule – Frequency (weekly, monthly, etc) and payment due dates.
  • Term length – Total duration before repayment must be completed.
  • Payment amount – How much needs to be paid each installment.
  • Late payment penalties – Will you charge fees for missed payments?
  • Collateral – Are you putting up any assets as collateral for the loan?
  • Cosigners – Is anyone co-signing the agreement with you?
  • Loan purpose – What are you using the money for?
  • Contingency plans – What happens in emergencies where you absolutely can’t make a payment?
  • Contact information – Phone numbers, emails, and addresses for all involved.
  • Signatures – Dated signatures from you and the lender.

Treat this like a business transaction, not a casual verbal agreement. Having clear rules and documentation in place makes the process smoother for both parties.

Some tips for setting terms:

  • Keep payment periods short, like weekly or monthly, to pay back faster.
  • Offer interest at least 2-3% below current bank personal loan rates, especially for larger loans.
  • Tie payment dates to your income schedule, like paydays.
  • Build in some flexibility for grace periods or amended timelines if needed.

Communicate Openly and Honestly

Have an upfront honest conversation before finalizing the agreement.

  • Explain the situation – Tell your story transparently while owning responsibility for the situation.
  • Share the repayment plan – Demonstrate you have a realistic budget and timeline to repay on schedule.
  • Discuss challenges – Identify any foreseeable issues that could delay repayment. Proactively strategize solutions.
  • Remain calm – Have an open discussion, not an emotional outburst.
  • Listen to concerns – Address any reservations or alternative options they suggest.
  • Express gratitude – Sincerely thank them for even considering your request.

Do not approach the lender with a sense of entitlement because of your relationship. Be humble, honest and appreciative. Offer them time and space to consider or decline the loan if needed.

Above all, avoid making promises you aren’t positive you can keep. It’s better to pleasantly surprise with early repayment than constantly ask for extensions.

Follow Through On Repaying As Agreed

Once you’ve secured the loan, you must stick to the arranged repayment schedule diligently.

  • Automate payments – Set up automatic transfers from your bank account on payment days.
  • Cut nonessential costs – Review your budget and trim any expenses not vital to daily living.
  • Pick up side work – Increase your income with a second job, freelancing, or monetizing skills.
  • Communicate proactively – Provide updates on your progress and any potential hiccups well in advance of due dates.
  • Adjust if needed – Renegotiate politely if you anticipate struggling with any payments. Don’t just default.
  • Express gratitude – Thank them again once the repayment is complete, acknowledging the risk they took.

Ideally incentivize yourself to repay ahead of schedule. But under no circumstances should you dodge the lender’s calls, make excuses, or break your promises. This destroys trust.

If an emergency derails repayment, immediately discuss how to get back on track. Propose a new realistic timeline and do whatever it takes to stick to it, even if it means finding additional income sources.

Maintaining Healthy Relationships

Beyond the financial logistics, you need to protect the relationship too.

Be Appreciative and Respectful

Never take the lender or the money for granted.

  • Acknowledge their sacrifice – Understand they are taking a risk to help you and remember that.
  • Follow their rules – If they impose spending restrictions or accountability checks, understand their need to protect their investment.
  • Don’t overask – Only request an amount you can repay quickly. Don’t become dependent or constantly in debt to them.
  • Give space – Don’t smother them with excessive gratitude or hold the loan over their head. Give breathing room.
  • Remain reliable – If they turn to you for help later when able, be willing to support them reciprocally.

Show Gratitude in Action

Look for meaningful ways to demonstrate your appreciation, beyond just saying ???????thank you.??????? Consider:

  • Pay interest – Even a small (2-4%) interest rate helps acknowledge the value they provided.
  • Pay it forward – When back on your feet, lend to another person in need.
  • Give small gifts – Give token gifts or gift cards when milestones are reached.
  • Do helpful deeds – Offer your skills and services for free in return.
  • Write thank you notes – Handwritten notes carry more meaning than texts.
  • Celebrate repayment – Take them out for a special meal when you’ve repaid the loan.

Genuine gratitude goes a long way. But don’t overdo it to the point where the lender feels uncomfortable or wants to cut ties. Find the appropriate balance.

Manage Expectations Realistically

Do not gloss over potential issues or make unrealistic assurances about repayment. Underpromise and overdeliver.

  • Be conservative – Don’t insist you’ll repay early unless you’re 100% positive you can.
  • Plan for contingencies – Have backup options if your original repayment plan falls through.
  • Readjust as needed – If early issues emerge, discuss extending the term or adjusting installments.
  • Learn for next time – Reflect on what went wrong to make better borrowing decisions moving forward.

Letting the relationship deteriorate over unmet expectations helps no one. Have open lines of communication from day one through final repayment.

Alternatives to Borrowing Money

If at all possible, explore substitutes to borrowing funds before putting relationships in that situation.

Seek In Kind Support

Rather than asking loved ones directly for money:

  • Request childcare – If finances are tight due to childcare costs, ask relatives or friends to babysit for free in the interim.
  • Ask for rides – If your vehicle is unreliable, see if they can provide free transportation until you get it fixed.
  • Inquire about spare equipment – Need a working laptop for job interviews? Ask if anyone has an old one they’d donate.

Depending on your situation, practical support can boost your finances without loans. But make sure not to take advantage by making excessive requests.

Offer Your Skills and Services

Offer to use your abilities, knowledge, or time to help someone in exchange for funds or value.

  • Bartering – Direct exchanges like tutoring computer skills for fence painting.
  • Cleaning, organizing – Many people will pay for these mundane tasks that you might excel at.
  • Repairs, installations – Furniture repair, electronics wiring, pipe fitting, etc. Lots of niche skills have value.
  • Pet care – Offer dog walking, pet sitting, grooming services.
  • Writing, editing, design – English majors, journalists, marketing pros, leverage your talents.
  • Rentals – Rent out spare rooms, vehicles, equipment, parking spaces.
  • Reselling – Buy second-hand goods to flip on Craigslist, eBay, Facebook.
  • Delivery services – Sign up for apps like Uber Eats that let you earn on flexible schedules.

You can likely earn a few hundred to a few thousand dollars by matching your skills to people’s needs. Experience helps, but many skills can be self-taught through books and online tutorials.

Seek Financial Counseling

If you’re chronically short on money every month, consider seeking professional guidance on managing your finances.

Nonprofit credit counseling agencies can provide:

  • Budgeting help – Review income and expenses and create a balanced spending plan.
  • Debt management – Help consolidate and reduce high-interest debts.
  • Credit improvement – Give tips on improving your credit score over time.
  • Resource referrals – Connect you with community aid, grants, social services, etc.
  • Accountability – Check in on your progress and keep you motivated.
  • Bankruptcy advice – Honestly assess if this route could work for your situation.

Many offer free initial consultations. Ensure the agency is accredited by the National Foundation for Credit Counseling.

Financial counseling assists with developing money management skills, rather than just temporarily borrowing funds. This enables you to build permanent stability.


Borrowing from family or friends may feel like an easy out yet carries serious relational risks. With careful forethought, open communication, and commitment to repayment, you can preserve trust and goodwill on both sides. But don’t consider it lightly or overuse this option as an easy crutch. Ideally, cultivate financial practices that help you avoid needing loans from loved ones as much as possible. When in doubt, find other solutions that don’t jeopardize important relationships.


Should I borrow from family or friends to pay off high interest debt?

This depends on your relationship and their financial situation. If they can offer a lower interest rate, it may make sense in the short term. But avoid becoming dependent long term on loans from family and friends to cover poor financial decisions. Strive to pay off debts yourself and learn better money habits.

How do I decline borrowing money from a family member or friend?

Politely thank them for offering and explain you do not feel comfortable accepting this type of loan or placing this strain on your relationship no matter how well-intentioned. Suggest alternative ways they can support you that don’t involve lending money directly if applicable. Reaffirm how much you value your relationship with them.

What percentage interest is fair to pay on a loan from family or friends?

There is no set rule, as it depends on the size of the loan and your relationship. Offering 0% interest is fine for smaller loans under $1000 from immediate family. For larger amounts, 2-5% interest shows good faith while still being well below bank loan rates of 10-35%.

What if a family member or friend defaults on a loan I provided them?

Have an honest discussion on why they defaulted. If it was unavoidable, consider forgiving part or all of the remaining balance to preserve the relationship. If they simply ignored their responsibility, set clear expectations going forward and only offer another loan once they demonstrate commitment to financial accountability.

Can I write off a bad loan to family or friend on my taxes?

No. The IRS does not allow you to deduct bad debts from personal loans, only business loans that became uncollectible. You should view lending money to family and friends as a gift, not an investment. Only lend amounts you are comfortable not being repaid in full.


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