Would you ever tell anyone you know that you won the lottery?
A lot of people wouldn’t! Telling everyone you’ve won a fortune can be the quickest way to lose it.
In South Africa where more than 25 million people have debt, borrowing money from friends who have your best interests at heart is tempting. Is that the smartest way to handle your finances, though?
This article will help you weigh the pros and cons of asking friends for money so you can decide which choice is right for you.
Pro #1: No Paperwork
Applying to multiple lenders can hurt your credit. Sometimes it’s best to avoid all the frustration if you suspect you’re not eligible to get a reasonable loan. Taking out a personal loan from a friend can make the process effortless.
Con #1: No Liability
This may sound like a pro, and perhaps it is for some. The majority of people who are asked for money suspect they’ll never get it back. Without any formal agreements, borrowing money from family may create a lot of tension.
Pro #2: Borrowing Money From Friends Means No Interest or Fees
Your friends aren’t a big business, which means they would never try to gain anything by taking advantage of your financial needs. South Africans happen to be the biggest borrowers in the world. Anyone who has taken out a small loan understands how quickly it can turn into a big loan.
Con #2: You Could Hurt Their Finances
Asking family for money, especially parents, could mean taking from someone who needs that money as much as you do. If your family doesn’t want you to worry about them, they may agree to loan you money even if they don’t have it.
Pro #3: They Are Understanding
If you’re struggling to stay on top of your payments, loved ones are a lot more understanding than big businesses who only want to make a profit. If you can’t afford to pay a creditor, they won’t think twice about taking your belongings or kicking you out of your home.
Friends and family don’t want to see you suffer. If they know you have a good heart, then they will feel good about helping you get back on your feet.
This all depends on your reputation, though. If they know you have a tendency to back out of promises, then asking them for money could be a terrible idea.
Con #3: If You Fail to Repay Them, Things Get Ugly
Money and friends rarely go hand-in-hand. Even marriages can fall apart when one partner starts making more money than the other. Money makes people a little crazy.
Before you ask someone for money, ask yourself this: Will I be okay if I lose this relationship? If your answer is no, then you need to think about how badly you need money. If you fail to repay them, the likelihood of your relationship ever staying the same is slim.
Need More Help?
Little Loans is dedicated to helping people find the best loans for their financial needs. We understand how tricky borrowing money from friends can be, so we want to help you avoid any strains on your personal relationships. For more information about how we can help you, visit our FAQs.