When we are in need of some extra financial help what are our first instinctive options? To borrow a small amount from your parents or siblings to help make ends meet. When you get comfortable with this you may slowly get into the habit of taking a bigger loan from family and friends. We mostly resort to the option due to extremely easy accessibility, absence of interest rates and no urgency or a rigid structure for repayment. However tempting the option may seem, here are 5 good enough reasons why you should not take a loan from family and friends.
Lack of clear terms to borrow money
As simple as it may seem to borrow money from your friends and family, it can get complicated as there lacks certain clarity on lending terms. In the absence of legal documentation unlike a loan company, you tend to approach the repayment with more callousness. You are more likely to skip a month or two of repayments as there is no interest or late fee. Additionally your friend may not be comfortable with lending you money if you have any previous debts. This lack of clarity may lead to friction and a strained relationship between the parties.
No protection of legal framework
In the case where you borrow money from a bank or NBFC, both parties function within a legally drawn set of rules where terms like loan amount, interest rate, repayment method, loan tenure, processing fees, late fees etc are discussed and agreed upon. This gives a sense of security for both the lender and the borrower. However if you take a loan from family or friends, there are chances that they might change their mind about the discussed loan amount, or alter the repayment terms when they have their personal emergencies.
They may or may not lend to begin with
Your close relationship with your counterparts is a natural influencing factor in getting a loan from family and friends. Since they know your daily habits, lifestyle and expenses they might not be too keen to lend you money to buy a new iPhone, mac or cover a part of your lavish wedding expenses. You have better chances of securing a personal loan rather than a loan from family or friends in this case
This is the most uncomfortable and awkward consequence of taking a loan from family and friends. The awkwardness in approaching for money, the difficulty of the other person to either turn down or approve your request and asking for the money back, all cause strained relationships. If you borrow money from your friends they will feel obligated to their money, the way you spend it and their behavior with you might turn hostile in the case of a late payment or default. This can end up ruining family ties and long-lasting friendships.
Reputation on the line
The minute you decide not to borrow from a bank and rather take a loan from family, word spreads like wildfire that you are incapable of affording a traditional loan and interests. Even worse if you falter to make the payments on time, the disgruntled family member of friend talks about his/her loss by lending you money, thereby permanently damaging your reputation and potential acquaintances in your social circles.
Weight out the consequences of getting a loan from family and friends against the few perks it offers. It might not be worth losing a long-standing relationship over some monetary issues.
Alternatives to getting a loan from family
It is always a good habit to borrow and make the monthly repayments on time as it helps build an impressive credit profile. It shows your ability to afford credit assistance which is a factor for acquiring bigger loans in the future. This can be done in the form of instant personal loans or getting a credit card. With several advancements in the lending sector you need not even approach a bank anymore to get loans. Just from the tap of your phone you can apply for an online instant personal loan without any requirements to pledge assets. As alluring as it may sound, the interest rates on personal loans can be quite high as they are unsecured loans, leaving the lender to make up for the lack of surety with soaring and varying interest rates.
On the other hand you can apply for a gold loan online which saves you the trouble of high interest rates. Gold loan characteristics normally include less interest rates, zero user-end restrictions and no credit check. A pioneer in online gold lending, Rupeek provides affordable loans ranging from Rs.5000 up to 2 crore rupees according to your loan needs and available jewelry. If you are looking for a quick monetization of an asset, you can pledge your existing gold jewelry for credit assistance. Rupeek offers India’s first doorstep gold loan solution where loan officers do KYC and gold evaluation from the safety of your own home. This unique doorstep gold loan feature ensures complete privacy and safety throughout the process. You can also use the popular gold loan calculator feature on the site to assess the interest rate and EMI you will incur.
So forget borrowing from your near and dear ones and jeopardizing the precious relationship. Take the absolute tension-free gold loan from Rupeek and meet your temporary expenses without any worry.