Avoid Pitfalls of Loans between Friends and Family
Keeping personal and professional business separate is something most people prefer, especially when it comes to money. Why? Poor business and/or financial management can ruin a friendship and that’s certainly something you would like to avoid. Nevertheless, there can be situations when there’s no one else to turn to. If you need money for an urgent and valid reason and you think you’ve exhausted all other options, should you accept your friend’s monetary assistance? If you just cannot afford to turn the offer down, here are a few tips to avoid the pitfalls of mixing money and friendship, as either borrower or the lender.
First of all, borrowing from (or lending to) friends and family should be the last option. If you can get it from a landing institution (read more about getting an urgent loan in Singapore at Happyloan.sg), do so! Before you offer or accept money, make sure that there are no other avenues you could pursue. If one bank has turned you (or your friend) down, you haven’t tried all of them, right?
Many people fail to treat a loan from a friend like a business arrangement, which is their first mistake. In case you don’t have a solid agreement in place, there are high chances someone will get sloppy about the situation. So, prepare a promissory note which will outline the repayment time frame, the amount being borrowed etc. Both sides should keep a signed copy of the note.
Most people don’t mind lending money and helping out, but if they realize the money’s being misspent, it can be a problem. A lender friend will surely watch your financial transactions more closely than usual. Even if you think that something you’re spending money on is a “must have”, your lender friend may not agree.
Paying money back should be your first priority, anytime you borrow it. Make sure you’re repayment agreement is something you can meet. If, however, it takes longer than you thought it would, talk to your lender and try to explain the circumstances. If you have good reasons for the delay, most people will understand.