Anyone with debt has the same idea – ask the family for help. However, just because your family can help doesn’t mean they are best choice even if the advantages are obvious. For example, you can borrow a lot of money without paying interest on the loan and getting in trouble with the bank thanks to your family. Still, you should never let one positive get in the way of the negatives that can occur when you borrow from family, especially when, sometimes, the cons outweigh the pros.
They Are Open Ended
Open ended loans are loans that don’t have a set date for repayment. That might seem like a good thing now, but that will change in the future. At some point, your family will need the money back unless they are very wealthy. When that day comes, it can come as a surprise. If you aren’t ready for it there will be complications, but you can’t deny your family the money. Remember, it is their money. A lack of a payment plan or payment date can leave you in worse trouble than before if they demand the money back as you still have bills but no liquidity.
Things Can Get Awkward
Borrowing from a family member isn’t like borrowing from a bank. You have to do whatever the banks says because there are penalties for not complying. This isn’t always the case with your parents as there are no realistic penalties. If you can’t pay back the loan, you can’t pay back the loan and you arrive at a stalemate. It doesn’t sound like a problem but it will lead to problems down the line, the main one being awkwardness. The usual result is that the awkwardness escalates into anger and both parties end up burning bridges. There are numerous examples of families that don’t have a relationship because of a bad loan.
Your Family Isn’t Your Only Option
People often go to their parents because it is their last options. You may have bad credit, for instance, and the bank won’t give you a loan. And, if the bank won’t give you a loan, no one will, right? Wrong because a bank isn’t your only option, just like your family isn’t your only option. Anyone that is struggling financially can get a bad credit loan from a range of lenders. Okay, they might not suit you as the rates will normally be far higher, in which case you might have to turn to your family. Think about your options before you make a decision.
You Become A Servant
‘You rang, m’lord,’ is a phrase that you might say a lot more often if you lend from family. Of course, they will never turn you into a servant. Among many other things, it is illegal and immoral. The point is, however, that you might feel obliged because you owe them money. Your debt might make you feel like you have to change your relationship, and you can become a pawn as a result. No one wants to be a pawn, especially a pawn that is in debt.
Families are a great source of support and comfort, but you should think twice before they become a source of money.