If you are short of money and are looking at taking out a loan, there are many different options to choose from. One of these options, includes turning to friends or family members for a loan as an alternative to applying for short term loans or going to your local bank. Whilst asking friends and family for money is not something everyone feels comfortable with, it can certainly have its advantages over other options available, should you choose to ask. We take a look at some of the main benefits below.
Borrowing between friends and family is not regulated by the FCA. It is not necessarily recorded anywhere, is between parties and is not backed up by any eligibility checks and therefore does not count as regulated activity. This certainly appeals to those who might have been turned down by traditional and mainstream lenders and are looking for a flexible solution.
One of the biggest advantages of asking family and friends for a loan is the flexibility afforded to you that would otherwise be difficult to obtain from banks. It is likely you won’t have to meet extensive financial criteria in order to borrow money from family, and private lending means there may also be the option of more flexible payment schedule. This means that should for any unexpected reason you fall behind on repayments, you will not incur any later fees, penalties or damage to your credit score.
Quicker than applying for loans
As you won’t have to fill in forms and wait to find out whether you have been accepted for a loan, as you would with a bank or another provider, another benefit of borrowing from family and friends is the amount of time you can save, and receiver quicker the money you need.
No debt collectors and bailiffs
If you find yourself in financial difficulty and end up not being able to keep to your repayment schedule, this could end up with debt collectors or bailiffs come knocking at your door. That is a potential situation that could occur if you take out a loan with a bank or lender. However, borrowing from friends and family means that this won’t happen, which can alleviate a huge amount of stress.
Write up a contract
As stated, there are numerous advantages to asking friends and family for a loan instead of through other outlets. Nevertheless, it is best to exercise some caution. It is recommended that you, and the person whom you are borrowing from write up a contract that stipulates some rules to abide by before money is exchanged. This is important step to take when sorting out a loan transaction as it is a way of reducing potential arguments about the transaction in the future, and with you both knowing where you stand. It can also help give everyone involved some peace of mind, too.