How to borrow money from friends without drama
Image Source: Pexels
Borrowing money can be difficult. It can strain relationships if it is not done with honesty and open communication. It’s uncomfortable to chase down a friend that hasn’t paid back a loan. However, by following a few simple etiquette rules, you can navigate these situations smoothly and avoid unnecessary drama.Should You Borrow Money from Friends?
Sometimes borrowing money from friends and family is the best option for your financial situation. It’s possible that you don’t have the credit score required to qualify for a bank loan. If you have an urgent expense, you may need money quickly. Regardless of your situation, when you borrow money from friends, there are clear do’s and don’ts to maintain your relationship and avoid drama.
Be Transparent
Tell your friend exactly why you need the money and what you intend to use it for. If you are vague in your explanation of why you want the loan, it may be difficult for your friend agree to it. Be honest and upfront, rather than making excuses. Consider the financial status of the person before you ask for money. Do not put your friend into a difficult situation if they cannot afford to loan you money. Don’t pressure your friend to lend you money. If they say that they can’t give you a loan, don’t pressure them further.
Create a Loan Agreement
Image Source: Pexels
Like any other loan, borrowing from friends will come with an agreement. The agreement should state how much money is being loaned, when the loan will be paid back, and whether interest is charged. You should also mention what will happen if your friend does not pay. A signed agreement between friends may seem unnecessary, but it protects both parties. If you are borrowing a larger amount of money, you may even want an attorney to draw up this agreement.
Keep Your Promise to Repay
If you are borrowing money from friends, make sure that you are able to repay the loan. You should discuss the repayment method, such as Venmo or cash. You’ll need to plan your budget so that you don’t forget any payments. Remember, if you value the relationship with your friend honoring your promise to repay them is paramount.
Consider Tax Implications
If you are borrowing a large sum of money from friends, there may be tax implications to consider. Both parties can be taxed on loans between family and friends. Interest payments could be taxable if the loan value exceeds $10,000. If a loan has been forgiven, the amount may be considered a gift that is taxable. You should understand the implications so you and your friend are not surprised. What was your experience? Let us know in the comments.
Read More
Dave Says: Preparing for the Future
How to Beat Inflation – 10 Actionable Tips
