8 Reasons Not to Borrow Money from Family Members
If you’ve been in a position where you’ve borrowed money from a relative, you may know all too well that sometimes it doesn’t work out as planned. Getting a loan from a family member, especially if the two of you are close, may seem like a good idea because of perceived generous loan terms. Beware however before asking a family member for a loan; there are potential pitfalls you should first consider.
The act of having to ask anyone for money, and especially a family member, can be awkward. Money issues are personal and private matters. Having to let a family member know you are short of money can put both of you in an uncomfortable position.
Asking a family member for money can put pressure on that family member, making them feel as if they must provide you the loan.
The “fine” print
Though there may be no official loan document, your family member will expect you to pay the loan off in the agreed-upon time. This is not unreasonable, but there also may be underlying strings attached. This family member may come to you in the future and ask a favor. You’ll feel obligated, even if you’d rather not grant the favor. Your family member likely will have a “you-owe-me” attitude based on their past loan to you.
Loss of relationship
Of course, a loan from family members or any money matter can result in a bad relationship. It may even cause irreparable harm.
Personal financial matters are private, and you probably want them to stay that way. No matter how much you may trust a family member, don’t count on them to keep your loan information to themselves.
Hardship for the lender
A family member may feel they must give you a loan, even if they don’t have the funds to do it. This will not only create a hardship for the lender, but it also can breed animosity between the two of you. Despite the fact that the family member agreed to make you the loan, they may blame you for their own decision and resulting financial troubles.
As with any agreement, there are bound to be misunderstandings. Issues involving money can be especially tricky. A family member who agrees to lending money may find they need their money back before the agreed-upon time, or you may have difficulties paying the loan off on time. There are a number of misunderstandings that may arise.
Reputation on the line
Your reputation is on the line when you borrow money, whether it be from a bank or a family member. A disgruntled family member, however, may tell other family members and friends about your loan or failure to pay it back. Your reputation among these people will be soiled, and you probably can count on never getting another loan from an acquaintance.
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