When money is tight, but a necessary expense comes your way, getting a loan can do a lot to take the pressure off. That said, maybe you have a bad credit score that disqualifies you from receiving a loan, or maybe you don’t want to deal with the extra interest and other charges.
If you are in need of some extra cash, asking for a loan from family and friends can be a great way to get some help without ruining your finances, and you’ll have extra wiggle room you wouldn’t receive from a bank.
The tricky part of course is handling a personal loan without ruining your relationships. Proving to someone that you will repay them can be difficult. To help you out, here are some strategies and tips to make sure asking for a loan goes as smoothly as possible.
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Asking for a Loan
A loan can be a big favor to ask of a friend or family member. There is a certain amount of risk involved for both lender and borrower. Realistically, the lender might not get their money back, and if they don’t have cash on hand, they might have to use credit cards (or take out a small loan) to cover you, putting their credit at risk.
When asking for money, you’ll need a good reason. Be prepared to explain how you intend to use the money. Tell your potential lender exactly why you need the money, and make sure it’s something worthy of the loan. This could include getting a car repaired, helping cover medical bills, paying for school, or just helping make ends meet. If you want a loan for something frivolous like a new TV or the latest smartphone, don’t be surprised if they won’t give you the money.
Coming Up With a Plan
Asking for any amount of money requires proving that you are trustworthy and will pay back the loan. One way to do this is to have a written plan.
Important aspects to discuss in this plan include:
- How much money you need;
- How much of your own money is going towards the initial costs;
- How much of an interest rate you are hoping for;
- A timeline detailing when and how you are going to repay the loan.
In explaining when and how you are going to repay the loan, you could also include a budget for the future. That way, the lender can see exactly where your current money is going, and how much money you can allocate to paying off the loan. Giving the lender an opportunity to see your cash flow will help you be more trustworthy.
A well-thought-out plan can prove to a friend or family member that you are serious about the loan and understand what you must do to repay it. Providing a physical copy of a loan repayment plan shows lenders how much you need the money. It also gives lenders an opportunity to ask questions and cite any concerns they may have.
When presenting your plan, try to be as professional as you can. Dress nicely, be prepared, and present it in an appropriate location. Again, this will show that you are taking the loan seriously. It’s also a good idea to have a contract drawn up, stating the agreements of the loan in legal writing.
Maintaining a Relationship With Your Lender
Mixing relationships and money may result in some unwanted situations for both parties. Failing to pay back a loan could end your relationship with the lender altogether.
It’s important to establish boundaries in order to avoid ruining a relationship. While this might include trying to pay them back as quickly as possible, it also means explaining to them that you still intend on living your normal life. Going out to dinner every once in a while or attending an event shouldn’t drive a wedge between your friendship; spending your money carelessly, on the other hand, may.
Following Through on Your Loan Repayment Plan
Once you’ve gotten the loan, you want to pay it back as quickly as you can, within reason. Treat it just like any other loan, and be sure to follow the plan you’ve established. Treat your lender with respect and keep them in the loop. If you are going to be late on a payment, tell them the moment you know you’ll be late. Most importantly, remember to follow through on your personal budget to keep up with loan repayments.
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