Divorce is an extremely stressful thing to go through, and asking loved ones for money after divorce is a huge undertaking. Borrowing from family and friends may take the pressure off, however, it’s something that shouldn’t be taken lightly. So how do you ask loved ones for money?
Money trouble is, unfortunately, a situation that is all too common for people from every walk of life. Borrowing money in order to earn a higher education degree, build or buy a house or even to purchase a car can quickly lead to financial trouble. As the bills increase and the loan repayments continue to surface, it’s easy to fall behind. Even if people stick to a budget, the necessities of living can amount to more than what’s affordable.
Rather than face high-interest rates and strict repayment schemes, an alternative is to ask friends and family for money. However, such an arrangement should not be entered into lightly.
How Do You Ask Loved Ones For Money?
Borrowing money from loved ones and family members is not an easy thing to do. Both parties may feel guilt and resentment. That’s why, before even approaching individuals for a loan, all the options should be explored.
As an alternative to banks, peer-to-peer lending may be more beneficial. If this isn’t the case, borrowing money from people you know should be a measured and well-researched process. This way, the arrangement is more likely to work for both parties.
The reason that you’re borrowing should be understood by both parties. Sometimes it’s not always due to financial pressure, it could be a short term loan to pay off some debt or to settle on a home, but no matter what the reason is, it’s important that the communication is clear on both ends.
When approaching family for money, it’s important to be prepared. This means tracking spending, implementing a budget, and potentially calling the credit card company to negotiate better rates. After these steps, if a loan is still required, you will be in a good position to approach those closest to you. There is an element of guilt around asking for money. However, if people can see that you are trying to improve your finances, they will be prepared to say yes.
It’s important to reject an interest-free loan because an interest-free loan is basically a gift. In the wake of changing circumstances, such an arrangement could cause resentment, so it’s best to pay interest when borrowing money from someone you know. Paying interest doesn’t mean paying overs either. It simply means looking at current interest rates through peer-to-peering lending or big banks and coming up with a number that is fair and comparable.
Set Up Loan Documentation
According to the legal experts at Skaug Law, it’s completely up to each individual borrower and investor whether they would like to draw up legal paperwork. However, at the very least, there should be a payment schedule or plan of some sort.
Having a plan in place means that both parties know when the money is due and how much is to be expected. This keeps both parties accountable and prevents family or friend investors from having to actually ask for the money every week or month.
Protect the Relationship
Above all else, it’s important to avoid letting the personal relationship be reduced to a strictly financial one. Money troubles don’t last, but relationships do. Once the loan is paid off, you want to still have a friend or family member at the end of it. Protecting the close bond means being able to separate business from personal matters. By having a degree of separation, issues like resentment and guilt aren’t allowed to bubble under the surface.
Borrowing Money Without Ruining Relationships
Asking for help, especially financial assistance, is no easy feat. However, by asking trusted friends or family members, some people may find it easier than dealing with a bank. Like any financial matter, asking for a loan, especially from people you know, should be well thought out.
A helping hand from someone you know shouldn’t be taken for granted. While a lot of the pressure and paperwork associated with traditional bank loans are eliminated, it’s important to keep meeting repayments. A loan from a close contact isn’t an opportunity to take advantage. Rather, it’s a helping hand in a time of need that shouldn’t be taken for granted.