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Friends are always there to lend you a helping hand, but should you ask for that helping hand to have some cash in it? Find out why asking your friends for personal loans is not a great idea.
What’s Wrong with Borrowing from Friends?
Borrowing from friends may seem better than borrowing from a bank or credit union. You don’t collect interest or have a strict repayment schedule. And of course, your friend knows you! You’re not a faceless customer.
But having emotional ties to your lender isn’t exactly a good thing, especially when you can’t repay the loan in full or on time. Your friend could feel taken advantage of if you don’t prioritize repaying them. They could feel frustrated watching you make financially irresponsible decisions, like racking up a bar tab or going on a shopping spree when you still owe them money. Research shows that 1 in 3 people are willing to end friendships over $100 or less if they go unpaid. That’s a pretty small sum that could cause irreparable damage.
It’s not just your friend that you need to worry about. Remember: there are two sides to this loan. You might not handle the emotional stress of this borrowing from a friend, either. Will you feel guilty? Will you worry that they’re watching every expense that you make? Will this anxiety taint every social event that you attend together?
So, don’t ask your friend for an IOU unless you’re willing for your relationship to drastically change. It’s probably not worth the loan.
What Should You Do Instead?
You still need funds to cover an expense. If you can’t ask your friend for a loan, what can you do?
Instead of asking your friend for a personal loan, you should try applying for one online. You can find online personal loans with simple qualifications and easy application processes. If you apply and get approved, you can use the funds to cover your unexpected expense quickly.Then you can manage your repayments later on.
The biggest benefit of an online personal loan is that you don’t have any personal connection to the provider. There won’t be any emotional tension or hurt feelings over a slow, steady repayment. In this situation, you are a customer—not a companion.
Your credit card is another effective tool that you can use to cover an unexpected expense and then manage the repayments later on. As long as you make more than the minimum payment on your bills, you should be able to repay what you’ve borrowed at a comfortable pace.
You should only take this option when your credit card’s balance is far from the limit. You don’t want to overwhelm yourself with a steep balance that you can’t tackle—or worse, max out your credit card.
Ask for a Gift:
You can technically ask your friend for help, but it should come in the form of a gift. Why? Financial experts recommend that people give their friends money instead of lending it because it eliminates any friction of late or absent repayments. With a gift, you would have no obligation to pinch your pennies until you can return what you borrowed.
Don’t lose a friend over something like a loan! It’s not worth it.