It might be tempting to borrow from friends or family. Whilst this might be attractive as an option, particularly if a bank has refused to loan you the money, you need to think carefully before borrowing from friends and family. You need to be clear about whether you can afford to repay the loan; over how long; and what happens if you can't afford to repay the loan.
Some of the benefits and pitfalls of borrowing from friends and family.
- Borrowing from family can save you a lot of money because they may not charge you interest, like a normal bank or payday loan lender.
- If you borrow from a family member and don't repay the loan you might end up having a breakdown in the relationship.
Things to consider
- Work out a budget before you do anything and make sure you can afford to repay the loan
- Check how much you usually spend each month by checking your bank statements for the last three months
- Factor in unexpected expenditure when working out your affordability budget
- Discuss openly what happens if you find that you can't keep up the repayments
If things go wrong.
- Don't bury your head in the sand - let them know that you can't afford to repay.
- Put a plan together to continue paying
- Be prepared for a lot of stress
- Get advice on how to manage your debts