Should You Ever Borrow Money From Family?

Borrow money from family? Not something everyone would call a smart thing to do. But people do it all the time … and I hear a good number of them manage to survive (mostly) unscathed.

Unfortunately, that’s not true for everyone. Things can go wrong. People can do wrong. And not all families will forgive. But sometimes, if there isn’t any other way that you can think of (and worth thinking hard) then borrowing from them may be your answer.

Pros of borrowing from family

• You know how to find them.
• They know you. (Hopefully that’s a good thing.)
• Odds are they’ll at least listen to your reasons for needing the money and your plan for repaying them.
• They know where to find YOU (just in case) so perhaps that adds to their saying yes.
• If you handle it well any impressions they had of you will be vastly improved.
• Your low credit score won’t get you an immediate “no”.

Cons of borrowing from family

• If it goes badly you could lose the relationship.
• They may watch your purchases closely to see if you’re wasting their money.
• A family rift beyond just the two people might happen.
• If you don’t pay them back or are always late they may never let you forget it.
• You might feel more ashamed of not handling the loan well when dealing with family.
• You might not take the loan as seriously because they are family — and that would be bad news for everyone, including you and your financial future. This is a great time to make positive changes to your debt habits that stick.

So is there way to make it work?

First and foremost, if you decide to go ahead and ask you’ll want to find a way that keeps the relationship intact. Is the secret timing? Or about having a good enough reason? Maybe it’s about well-directed flattery and lots of smiles.

But whatever your approach, things go best if you help them feel absolutely secure that:

1.  You have thought this through carefully.
2.  You take your obligation to repay them very seriously.

And so when looking to borrow money from family, you need to make all that absolutely clear. Some things you can do to help them see you’re approaching this in a professional manner:

• Create a cash flow spreadsheet that includes your money coming in, your money going out, and your repayment schedule.
• Show them you have a budget and are handling your money much better now  — or plan to from now on.
• Maybe you’ve even taken on some extra work … even if not in your field and even if the pay is part-time or less than you’re used to. That shows real intent to not only repay but not put yourself in this position again!
• And finally — and this should be a big plus — draw up a contract for you both to sign.

More posts to help

What Do All Those Credit Terms Mean?

How Your Credit Score Affects Price of Things You Buy

Kicking Debt To the Curb: A Real-Life Success Story