If you want to keep the family love intact, you may want to refrain from borrowing money from relatives.
Likewise, if you want a better return on your money, don’t lend money to family members.
A recent CNBC article reported that only 57 percent of people who lend money to relatives get it back. And roughly 26 percent of them said they would never lend money to family members again.
Financial experts say before you consider borrowing or lending money to family members, you should take these themes into account.
Can the family member afford to make a loan?
Financial experts say you should always think of the lender’s financial conditions before you ask to borrow money.
Can they afford to lend you money or will it put a financial constraint on them?
If you do ask to borrow money, make sure the lender has time to look over their finances before agreeing to anything.
What conditions should you place on this loan?
Financial and legal experts say an agreement with terms and conditions must be put in place with family. It’s no different than what a financial institution would craft.
These terms should outline when payments are due, interest rates, and what happens should default occur.
Both sides should agree to the terms and conditions. If you do this in advance, the worst-case scenario will already be addressed.
What happens if you can’t pay the money back?
Financial experts say imagine the worst possible outcome. Think of what it will look like and how it can impact your family relationship.
How will the loan be forgiven if the family member can’t repay the loan? Discuss these scenarios before any loan is made.
Provident Loan Society is an alternative
If you need money right away but don’t want to borrow it from family members, there is a solution.
The Provident Loan Society is a not-for-profit lending organization that provides instant cash loans up to $100,000 for gold, jewelry, fine watches, and silverware.
They have been a trusted lending source to New Yorkers for over 100 years. The Provident Loan Society has lower interest rates than traditional pawnshops (26% versus 48%), longer payback periods (six months versus four months) and minimal ticket and handling fees.
Simply bring your gold and jewelry to one of the five locations in New York City. They’ll appraise the items right there and give you potential options for a short-term loan. The entire process takes less than twenty minutes. You can also do some research online with the Fast Cash Calculator.
About the Author
Charlotte Knobben studies journalism in The Netherlands and currently lives in New York City.