Borrowing money from family and friends should be the last option that you ever consider. Unfortunately, it is possible to find yourself in a situation where it is the only viable option. You will have to tread carefully in order to prevent losing the support of those you borrow from. Here are a few tips that should help prevent any hard feelings.
- Make sure the terms of the loan are clear and in writing, including payment dates, amount of original loan, and the amount and interest charges.
- Plan for a default. All parties need to agree on what will happen if the loan is not repaid. It is better to have a plan in place and not use it, than to never plan.
- Stay in communication. Let the lender know if you are going to be late with a payment one month. Never make them call you.
- Try to use the lender as a co-signer at a bank instead.
Borrowing money from friends or family is a slippery slope. It is easy to rely on the relationship and be late on payments or not repay the family car loan at all. You will need to step up or you may find yourself short one friend or not talking to a family member.