Tips for Borrowing from a Family Member – Family Personal Loans

borrowing from familyIf you find yourself in need of some extra money, explore the option of  borrowing cash from a family member prior to applying for  personal loans. Taking out a  loan from a relative can be tricky since you are mixing business with a personal  relationship. Utilize the information below to decide if taking out a family  loan make sense for your situation and what you can do to ensure that you manage  yourself in a manner that will equate to a situation that is comfortable for all  participating parties.

– The only time you should ever consider borrowing money from a family member  is to satisfy an unexpected situation; like car repairs, home maintenance,  medical costs, etc.. Never borrow from a relative for the purpose of buying  something material or for taking a vacation. Putting money in the equation of  your relationship is going to put some sort of strain between you. Therefore  borrowing from family should be a last resort option and should never be used to  satisfy a wantâ¦.only a need.

– You are going to want to be careful when selecting a relative to contact  for borrowing money from. You want to avoid asking someone for a loan that is  not in the best financial situation themselves. Even if you know they won’t turn  you down, don’t take advantage of their kindness/commitment to helping family.  Attempt to ask somebody that you know is not only financially stable but will  likely have surplus cash to let you borrow.

– Even though you will be borrowing from family, conduct yourself in a  professional manner. Treat a family loan that same as though you were utilizing  unsecured  loans from a bank. Before any cash changes hands, make sure you have no  questions as a borrower and that your family member does not have any questions  being your lender. It is important that you are both comfortable and confident  with the short and long-term situation.

– This is the most important tip! Develop a promissory note/agreement that  describes all of the details of the loan arrangement that has been mutually  approved by both parties. Be certain to include any interest rates, the expected  monthly payments, penalties, etc.. And since you are taking a loan from a  family member, you may want to consider adding a note about confidentiality to  your agreement since you are probably not going to want any other relatives  knowing about your situation. You don’t want anyone passing judgment on you  without fully understanding your needs.

– If you can, provide some type of collateral to show your honesty and intent  of paying the loan back. If you expectantly succumb to bankruptcy your relative  is going to be on your list of creditors that are owed since there is collateral  associated with your loan. This should establish a strong comfort zone for your  family personal loan provider when lending you their hard earned cash.

– Be certain that both you and your relative comprehend the tax consequences  of lending and borrowing money. A good idea would be to have a conversation with  an accountant prior to finalizing the loan to determine if the arrangement will  attract the attention of the IRS or as a borrower if you can deduct the interest  costs that you are being charged.

– If you can, pay your family loan off sooner than you agreed to. Doing so  will likely keep the door open in the future for borrowing again if needed. You
don’t know when you may be faced with another emergency!