How to Ask Your Family and Friends For a Loan
When money is tight, but a major and necessary expense comes your way, getting a loan can do a lot to get the pressure off. But, maybe you don’t have good enough credit to qualify for a loan, or don’t want to deal with extra interest or 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 to get extra wiggle room you wouldn’t get from a bank. The tricky part is handling a personal loan without ruining relationships, and proving to somebody that if they lend you the money, you will repay them. 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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Swallow Your Pride
You are (or will be) asking somebody for help. If you are asking for a loan, it’s probably a significant amount of money you are need of. That means you are asking for a big favor from somebody. There is a measured amount of risk involved for those that you’re asking to borrow from. Realistically, they 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.
So, go ahead and swallow your pride. Nothing is as much of a turnoff as somebody asking for money while being cocky or prideful. It might be embarrassing to ask for money, but don’t try to balance it out by being rude.
Be prepared to explain what the money is for. Tell your potential lender exactly why you need the money, and make sure it’s something worth the loan. This could include getting a car repaired, helping cover medical bills, or just helping make ends meet. If you are wanting to get a loan for something frivolous like a new TV or a fancy smartphone, don’t be surprised if they won’t give you the money.
Come with a Plan
To get a loan, you have to prove that you are trustworthy and that you’ll pay it back in a mature and reasonable manner. One major way to do this is to have a written plan detailing every part of the loan.
Important parts to include in this plan are exactly how much of a loan you need, how much of your own money is going towards the initial costs of whatever you are paying for, how much (if any) of an interest rate you are hoping for, and a timeline of when you are going to repay the loan. This can be very important, as people might have been planning on using the money they are lending you to pay their own bills or debts.
Another important aspect to include is 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 them off without ruining yourself financially. That way, the lender can see your cash flow, and that you are trustworthy and able to pay them back.
A well thought out plan can show a family member or friend that you are serious about the loan, and know exactly what you need to do to repay them. If you have a physical version of it, then they have something they can hold onto in case they have questions or concerns. The more of those concerns you can address before they even ask them, the more likely they’ll be to trust you with their money.
When presenting your plan, try to be as professional as you can. Dress nicely, be prepared, and try to do it in an appropriate location. Again, this will show you are taking the loan seriously and not just taking advantage of your relationship. It’s also a good idea to have a contract drawn up to have the agreements of the loan in legal writing.
Try To Find Ways To Prevent Awkward Moments
When somebody is a regular part of your life and they lend you money, there are going to be awkward moments. There are going to be times that they see you going out to dinner and they will likely wonder, “If you have money to go out, why don’t you pay back what you owe me?” There is also the risk of failing to pay back the loan, which could lead to a complete end to the relationship.
Find and establish different things you can do to prevent those awkward or relationship ruining situations. This might include trying to pay them back as quickly as possible, or explaining that you will set aside money to pay them back on time, but you still plan on living your life.
It’s also important to set out when you plan on paying them, the form it will take, what will happen if you are late on payments and when it is acceptable for the lender to reach out when you are late. Nothing would be quite as aggravating as mailing a check the day before it’s due and then getting a call the day it’s due asking where the money is.
Once you’ve gotten the loan, it’s time to get it paid back as quickly as you can. Treat it just like any other loan you have, 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. Don’t brag about how much money you have or how good you are doing if you still owe them money.
If you aren’t willing to do the work and put yourself in the hands of a friend or family member, there are other solutions to help overcome financial problems. Borrowing money from informal lenders comes with a lot of benefits, like lower or even no interest rates, flexible arrangements, and trust, but isn’t for everybody.
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Ben Allen is a freelance content creator and digital marketer who believes in helping small businesses succeed. He spends his free time bragging about his two daughters, eating stuffed crust pizza, and playing video games.
This post was updated July 28, 2017. It was originally published August 2, 2017.