7 Golden Rules to Follow When Borrowing Money from Loved Ones
Nov 20, 2020 10:53:00 AM
The time may come when you’re in a pinch and you’ll need some financial assistance to get you through. Perhaps it’s because you’re having a hard time settling important household bills. Maybe your income isn’t as consistent as it was before, and you want to have a financial cushion before you dip into your savings. Or, perhaps an emergency, like your car breaking down, set you back a hefty sum. When taking out a loan or earning extra money aren’t viable or quick enough solutions, you might be able to borrow money from loved ones.
Your family and friends want the best for you, and thus may very well be willing to help you out. But in order for you to keep their goodwill, you must be able to honor your debts. First, it’s the right thing to do. Second, although they may be in a position to lend you money, they will likely need it back to cover their own needs. Third, not paying people back on time may add some strain on your relationship with them. You can prove your maturity and trustworthiness to your loved ones by being conscientious about your debt, and your relationships will become stronger for it.
Here’s some more timely wisdom on repaying debts, courtesy of PayMaya. Follow these seven golden rules for borrowing money to boost your finances—and your standing with the people who care for you.
Let Them Know Why You’re Borrowing
Though you likely won’t have to explain your situation in intimate detail, it’s good to let your loved one know why you’re borrowing money. This should give them an idea about where their money’s going and assure them that they can lend it to you in good faith. It may also clear up any damaging assumptions that you’re not putting the money to good use.
Only Borrow an Amount You Can Pay Back
Another important rule to follow is to set realistic expectations for how much you should borrow. Never borrow more than you can actually give back to your creditor. Putting a cap on the amount is both better and safer for both parties. Once you agree on an amount, stick to it and commit to repaying every single centavo.
Agree on the Borrowing Terms and Method of Repayment
It should also be a priority for you to settle your terms for borrowing the money and your terms for paying it back. Come to an agreement with your loved one about when they can expect full repayment, be it in a month or in six months. You should also agree on a channel for receiving money, as well a channel for sending your repayment. If you’re looking for a convenient method to claim the money they’ve lent you, consider getting your remittances through PayMaya. Your loved ones can also send you money using the app. Solutions like these may also help both parties keep track of the debt.
Keep a Schedule for Repaying Your Debt
Likewise, it will be good practice for you to keep a schedule for your repayment. Regardless of whether they’ve agreed to a one-time repayment or several installments, follow a timetable for settling your debt. Write the dates for repayment on your calendar, or schedule a notification on your mobile phone. Your obligations with your loved ones may not be as strict or as formal as with other creditors. But it will make a big difference to them if you can be diligent and professional about your payments regardless.
Return the Money as Soon as Possible
Better yet, even if you’ve set a schedule for your repayments, go the extra mile and pay them back earlier than what was agreed upon. Early repayments will go a long way, especially since they also need to maintain a healthy cash flow for themselves. Paying them back early communicates to them that you honor their time and their effort, and will definitely keep you in their good graces.
Find Ways to Improve Your Cash Flow
Though a family member or friend may have agreed to help you in the meantime, you don’t want to be dependent on them forever. A great way to pay them back—emotionally as well as financially—is to improve your own finances. This can be your time to level-up your budgeting skills and to cultivate even better financial habits.
Repay Your Loved Ones By Paying It Forward
On the flip side, there may come a time in the future in which your loved ones will need your help, too. Even after you’ve settled your debt, you can take the opportunity to repay their kindness in different ways. As a thank-you, you can gift your loved ones when you’re in a good position to give. Other ways you can express thoughtfulness are writing them a letter, scheduling a bonding activity with them, or donating to charity in their name.
Borrowing money from loved ones is one of the quickest and easiest ways to address your financial problems. But don’t forget—you should honor your agreement with them just like you would honor a more formal contract. Strive for balance in your personal finances and in your relationships, and you, your friends, and your family will be greatly rewarded for it.