Asking Family and Friends For Money
Being Asked by Family and Friends For Money
It can be one of the more awkward moments in one’s life, asking a friend or family member to lend you money, or the opposite, being asked by a friend or family member to lend them money.
And this is not just the lend us a tenner, or maybe £20 till payday, but a real life loan, possibly hundreds of pounds if not more!
If you think being asked or asking someone for a loan can be awkward, think about how things may go if the loan is not repaid???
Matters can become extremely awkward should this occur.
For many of us, we are willing to help out a friend or family member should they find themselves in a financial predicament. If we have the money to lend to them, many of us will gladly help out.
There are a few questions that must be asked, not necessarily to someone’s face, but perhaps in the back of the mind of the person lending the money. Why the request to borrow money???
Why not just go to a bank and get a loan?
One answer to that question may be the person asking for the loan has bad credit, or no credit, and does not qualify for a mainstream loan.
It may be that the person seeking to borrow money is looking to purchase a property, or some other large purchase and needs help to qualify for the loan or the amount of loan they need. They may wish you to buy the property with them, or you put up the deposit, and they will pay the monthly payments.
There can be a variety of reasons why someone you know may come to you for a loan, or you go to someone you know for a loan.
The question is, how to you respond, how do you feel about lending money???
Terms of a Loan
When you go to a bank or lender for a loan, the terms of the loan are outlined in the loan agreement. These terms are:
* Amount of the loan
* If the loan is secured or unsecured
* Interest rate
* How long the loan is for
* Monthly payments
If you were to go to a bank, you would sign an agreement, and these terms would be outlined. So if you are lending someone you know a large sum of money, why not have an agreement drawn up as well.
This helps to alleviate any future misunderstandings.
Helping in Other Ways
There may be a time when you ask someone for a loan, or are asked for a loan, and you simply do not have the money to lend to that person.
However, you still wish to help them, but how?
It may be that your friend or family member does not qualify for a mainstream loan, but with your help, they could secure the loan they need.
You could act as a co-signer for the loan, or more and more lenders may ask for a guarantor for the loan.
A guarantor is someone who signs on the loan as someone should the borrower fail to pay the monthly payments, they as the guarantor will pay the payments until the borrower can resume the payments.
Being a guarantor is a good way to help someone out financially, without taking money out of your account or pocket.
Acting as a guarantor also helps the borrower build up their credit, and can also alleviate some of the awkwardness that can accompany asking someone for a loan.