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Borrowing Money from Friends or Family: A How To Guide

borrowing money

Whether it’s $2 for a cup of coffee, $20 for a bag of groceries or $2,000 to pay off credit card debt, many of us have resorted to borrowing money from friends and family to cover a quick splurge or pay off bills that we just can’t afford.

In fact, according to, an online comparison platform, Americans borrow as much as $184 billion each year from friends and family. According to the website’s survey, 38 percent of respondents have borrowed from people they know in the past year. The average loan runs around $3,250.

But, when money changes hands, as anybody who has borrowed even just a little cash from a friend or family member knows, trouble can brew.

If you plan on borrowing money from a relative or BFF, here are some tips to ensure your personal relationship stays strong even after the bill is paid up.

Tips For Borrowing Money From Loved Ones

Think carefully before you ask

First, take a hard look at your budget one more time. Will trimming your monthly expenses help you pay off that debt? Can you restructure your budget to accommodate unexpected expenses in the future? Could you skip meals out and reduce your supermarket spending to cut costs? Could you arrange a new payment schedule for your debts? Going to somebody you know for cash is a big ask, so be sure you absolutely need to make it.

At the same time, ensure the person you’re asking can afford to loan you some money. Your mom, for example, might be the obvious choice to hit up for $1,000 to cover your first month’s rent, but think about it before you approach her, so you don’t put her in an awkward position. Make sure the person you borrow money from doesn’t have financial worries of their own.

Write out your agreement

An easy way to ruin a relationship is borrowing money from a loved one and not being clear about how and if you’ll ever pay it back. That means it’s critical that you treat this arrangement like any other loan and set clear expectations and deadlines from the start.

In a written agreement that’s signed by both you and the person you’re borrowing money from, spell out

  • How much money will exchange hands.
  • How much interest, if any, will be charged.
  • Regular timelines for payment.
  • How the money will be repaid.
  • The deadline for paying the money back in full.
  • Consequences if you miss any of the deadlines.

Consider an app

If you don’t feel confident crafting your own document, online platforms make it easy to create agreements between the lender and the borrower that are designed specifically for those of us who need a little help from our friends and family. Both platforms also will help you do the math to calculate the interest cost.

With Lending Karma, you’ll pay a one-time fee of either $49.95 or $99.95 depending on your needs to build a legally binding agreement that will set up a payment schedule, track payments and more. With LoanBack, you’ll pay a one-time fee of either $14.95 or $29.95 for a loan agreement and more.

Pay on time—and early 

Never leave your friend or relative wondering when they’ll ever get their money. Always make your payments on time—or early. Put yourself in your loved one’s shoes. If the roles were reversed and they owed you money, it’s likely you’d want it on time. The Golden Rule applies in these situations.

Don’t forget that they’re still your loved one

The best way to ensure that the relationship doesn’t get awkward is to live up to your end of the bargain and pay on time. But it’s also important to maintain the same kind of relationship you had with the person before they lent you some cash. So, invite them over for dinner, hang out with them at family gatherings and let them know how much you appreciate their support.

If you are experiencing financial difficulty and are looking for a solution, non-profit credit counseling can help you make sense of all your options. ​Contact us today for a free financial assessment with one of our certified credit counselors.


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