There are several reasons why you may find yourself in a situation needing some extra funds. Home renovation, pending debts, your wedding, medical emergencies; the list goes on. In hopes of getting lower or no interest rates, and flexible repayment options, borrowing money from friends to repay your debts might seem like a tempting option.
Here are 5 reasons why this might not be such a good idea:
- Lack of clarity - In most cases where an individual borrows from a friend or family member, there is no legal documentation involved. In such a scenario, it is very easy for misunderstandings to crop up. For example, family or friends may not be ready to lend funds, if you are paying off a previous debt with the borrowed funds. On the other hand, you might falter on your repayment every once in a while, considering it is a friend you are repaying. This leads to a lot of friction between the two parties involved.
- Legal Issues - When you work with a financial institution, both parties work within terms outlined in your loan agreement. The institution provides you with the cash it agreed to provide, and you repay a definite amount back within a certain period of time. A family member or friend may change their mind on the loan amount, or alter the repayment plan midway through the loan due to their own personal emergencies or requirements.
- Influences lending decisions: Family and friends would usually want to know where you will be using the funds, before they lend it to you. At times, this can influence their decision to lend money in the first place. For example, you may need to borrow funds to purchase a replacement refrigerator or even sponsor part of the wedding expenditures. However, your family or friend may not be ready to lend the required funds, leaving you in trouble.
- Strained relationships - Another major risk you carry is jeopardising your relationship with the person. Any non-repayment or slow repayment on your part can cause a rift. On similar lines, the lender might feel obligated to his/her money and often it also changes their behaviour towards you.
Before you make a decision, weigh all the cons of borrowing from friends and family against the few pros. It may not be worth losing a trusted relationship over monetary issues.
You may want to instead, apply for a Personal Loan with HDFC Bank! HDFC Bank customers can easily get a loan within 10 seconds whereas non – HDFC Bank customers can get a loan within 4 hours. Moreover, with EMIs at Rs 2187 per lakh, one can repay the borrowed funds with ease. You can apply for an HDFC Bank Personal Loan here now!
Read more why a Personal Loan is a good choice to raise funds for your financial needs
* Terms & conditions apply. Personal Loan disbursal at sole discretion of HDFC Bank Ltd.
