It was Polonius, Shakespeare’s chief counselor to King Claudius in Hamlet that said, “Neither a borrower nor a lender be.” This advice still rings true today when it comes to borrowing money, especially from family and friends.
Why shouldn’t we borrow money to friends and family? Because as Polonius answers, “For loan oft loses both itself and friend.” A loan between a friend or family member often results in the loss of both the money and the relationship. To many times today we see new stories about how this situation could even become life threatening.
Borrowing between family members or friends can result in an entirely unexpected set of issues. We have put together 8 reasons not to borrow money from friends and family.
1. Tend to be Open-ended Loans
Loans to family and friends end up being “open-ended”. This is because the folks involved don’t reach an agreement for a timeline for repayments. Because of this the lenders don’t know when their money will be returned, and borrowers don’t know when to repay the loans so misunderstandings ensue and before you know it everybody is mad at everybody else. Both parties are in limbo, and this situation doesn’t set any expectations. The uncertainty can lead to stress.
2. Loans tend not to be a Priority
If a loan between family and friends is an open-ended loan, the borrower may not realize that there is a sense of urgency to repay the loan when that is what the lender is expecting. Without a deadline, repaying the loan becomes a last priority when it comes to paying bills. Many times because the lender is a family member or friend there is an expectation that there is some leeway in terms of repayment when, in fact, there is now; this leads to hard feelings.
3. Asking for the Money Back is Awkward
Let’s be honest….no one likes asking for money back; it’s awkward and uncomfortable. It can be difficult to request repayment of a loan especially from a friend or family member. When you care about the borrower you don’t want the borrower to feel awkward and as the borrower you may not realize this. Sometimes this situation will shut down communications with everyone avoiding talking about the loan altogether. Confused and hurt feelings can result.
4. Family Gatherings become Uncomfortable
Borrowing from a family member means that if you don’t pay that loan back it can make for some really uncomfortable family gatherings. Family get-togethers become a place where folks are avoiding each other because of resentments regarding the loan. It can also be uncomfortable to be around other family members who know about the loans.
5. Enabling Instead of Helping
When you borrow money from friends or family members, they are giving you an easy way out and this can lead to a constant situation where those who were trying to help you just keep allowing you to get into trouble making it possible for you to ask for their help again and again. One thing that the interest on a loan does is encourage people to not want to be in a situation where they have to borrow…it costs you money.
6. You May Become a bit of a Pest
Let’s be honest…lend someone money, make it easy for them and they will come back for more…even with the best of intentions….don’t become that guy. Many family members or well-meaning friends try to “help out” but what they end up doing is creating a situation where they are looked to as the “money tree” and this can lead to serious resentment. Let’s be honest once a person has loaned you money it makes it that much easier to ask again. It’s best not to start this practice in the first place.
7. The Person you Borrowed from Might Need the Money
What happens if you borrow money from a family member or a friend and suddenly they are hit with an emergency situation? They will definitely want their money returned, but they can’t very well force the return without hurting your feelings. What if they lose their job and have no income? What if they need to put food on the table for their kids? Not receiving repayment of the loan in a timely manner might make all the difference in the world to them and their family and if the loan can’t be paid back….well….there goes the relationship and you will feel horrible.
8. You Could Lose Your Money and the Relationship
Guilt, remorse, and anger…these are all byproducts of borrowing money from family or friends. Even the best of intentions can go south very quickly in this type of situation. The best advice anyone can give you here is, don’t go there in the first place. Obtaining a personal loan just may be a better option. Sure it will cost you a little interest but in the long run, better a little bit of interest instead of a relationship with a longtime friend or a family member.
It is understandable that you want to be a good person, and you want your friend or family member to be okay financially but what is best for everyone is if you just gently refuse to borrow, and instead ask for help finding loan alternatives such as a short term or payday loan. In the long run it is best to save that relationship.