by Natalia Jones

Created on: August 17, 2010

It has been said over and over that borrowing from family should actually be a last resort and you should try to avoid it at all costs. Many times people are not able to visualize when it is absolutely not a good idea to borrow from family so the following list has been compiled to help to crystallize the situation.

When Your Reasons are Frivolous

Borrowing from family is already a last resort measure, so it should go without saying that the reason for borrowing the money must be something really solid. If you are about to go into foreclosure and you can’t see another way out or if you need to get medical attention that is prohibitively expensive for instance, turning to family might be looked upon as a solution. However it is never a good idea to borrow money from family to buy a vehicle or take a vacation. These things can be put off until you can manage to save for them on your own and the object may become a bone of contention and a constant reminder of the money that hangs between your relationship.

When You Don’t Know How You’ll Repay It

If you don’t have a clue how you can ever repay the loan you are about to ask for then you should not borrow from family. It might be easy to turn to your family in times of need but it is unfair to put a strain on their resources for your personal gain. You should take these loans seriously and have a plan to repay them.

When You Know They Can’t Afford to Lend

If you know that you family cannot afford to lend you the money because they are under financial strain themselves it is unfair to ask them to help you. Your parents might find it hard to refuse your request, but you should think of their situation before you ask them for a loan.

When the Terms of Repayment are Unclear

Family loans are often informal and unstructured. You are very rarely asked to pay interest on a loan from family but at the same time you are depriving them of earning a return on their money. It is important to establish a repayment plan upfront. Whether this is a plan to repay small monthly installments or incremental lump sums when money comes in doesn’t really matter. What matters is that there is a system in place to make a repayment.

When Your Relationship is Shaky

If you relationship is already unstable adding a financial dimension is not a good idea. Money can make an already volatile situation even more explosive so you should refrain from tapping into family resources if you do not have a strong relationship.

These guidelines are here to help you to pinpoint when it is not a good idea to get a loan from family. Even if all of these situations do not apply, you should still explore you other options before turning to your family for money.

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