Everything there is to know about borrowing friends and family

Money makes the world go round, and people have been borrowing money for hundreds of years. This has led to a massive lending market, accessed by hundreds of millions of people from all around the world on a yearly basis. At this moment in time, there are numerous types of loans that people can get, including personal loans from banks, mortgage loans, stock loans, payday loans and more.

Others choose to borrow money from friends and family, as sometimes, this may seem like a better alternative for them, when it comes down to facing a difficult financial situation. However, over the years, numerous specialists have recommended people to stop borrowing money from their friends and families, as doing so can actually lead to a wide variety of issues.

To put things better into perspective, the process of lending money from either your friends or family becomes difficult from the moment you make your request. Most of the times, you will indeed find someone to help, but at the moment you do so, chances are that the relationship between you and the set person will deteriorate. This normally happens for various reasons, including an increasing lack of trust, possible delays of payment, but also turning the friendship into a lender and borrower relationship.

To put things better into perspective, failing to give the money back on time to a bank, or financial institutions will not bring about any psychological repercussions, but rather a few more fees, and a mail outlining to further course of action. With friendship on the other side of the spectrum, chances are that both your friends and family will start worrying about their money, and demand it back as soon as possible .

Regardless of the type of loan that you need, chances are that there’s something similar being offered on the market by an agency.

Your lending alternatives, designed to keep you from bothering your friends and family

For emergency loans, you can always get in touch with a payday loan provider. These agencies offer loans of a few hundred dollars to people who can show proof of employment, and are willing to sign a contract that requires them to pay back the loan within a few weeks, or within a month. Interest rates are generally quite high, yet the efficiency of the process, alongside with the money being given may make it worth it. Of course, leaving payday loan by payday loan isn’t a good idea either.

For personal, bigger loans, you can always get in touch with a bank. Do keep in mind the fact that getting a bigger loan also requires you to have a good credit score. Most of the times, this may check out, but in case you don’t have a very good credit score, then it is recommended to work on trying to fix it, rather than borrowing more money and placing yourself deeper into debt, rather than escaping it.

For loans needed to build a house, you can always consider the idea of a mortgage loan. These loans are meant to be used both when constructing, and when purchasing an actual, already-built house. The main advantage is the large sum of money that can be offered, whereas the disadvantage is that you’ll also have to put the set property on mortgage, as collateral. With this in mind, if you do not pay the debt back on time, then the bank and/or financial institution that you have contracted the loan from, can legally seize and sell your property to the higher bidder, to cover their losses. Therefore, it is essential that you make sure you’ll be able to pay the debt back on time, and only purchase properties that you can afford, without a loan, over the course of several months.

Based on everything that has been outlined so far, it should be understood that constantly borrowing money from friends and family can put a heavy strain on your relationship, thus leading to fights, deterioration of friendship and other unpleasant events. If you are 100% sure that you can pay the money back on time, and if you have a good relationship with the person that you’re thinking about borrowing from, this form of borrowing may be accepted, although it remains dangerous. This represents the main reason why we have also gone ahead and showcased some of the main alternatives to borrowing money from friends and families. Regardless of whether you need some emergency funds for an unforeseen event that has appeared in your life, or more money for dealing with anything else, there is a solution that doesn’t require signing over your friendship, but rather just a simple contract, thus making things better from all the points of view.

Understanding your Credit History

Sometimes we all find ourselves in a position where we need to spend more cash than we actually have. Regardless of how cautious you are with your finances, there’s always the chance that a disaster could suddenly happen which forces you to consider other lines of credit that might be available to you to pay for unexpected costs.
Unfortunately, for people who have had a difficult past, it’s not always easy to get your hands on the credit that you need. Building societies and banks are becoming more choosy about who they want to lend to, because they want to make sure that bad debts don’t have a negative impact on their bottom line. But what does having a poor credit history actually mean, and what information can banks and building societies get by looking at your credit file?

The Information on your Credit File

Lenders, no matter where you choose to go for your loan, will take a number of crucial factors into account when they are considering whether to give you the money you need or not. Although there are many different things that can impact your chances of getting finance, your credit file is by far one of the most important. There are three credit reference agencies that are currently used in the UK, including Experian, Equifax, and CallCredit, and each of these will carry their own version of your file. The report on your file will contain information about your financial history, including data on your loans, credit cards, and mortgage.
Whenever you apply for finance or a loan, the building society or bank that you want to work with will look at your credit report, and use the information they find alongside other current information (for instance, where you work), to give you a credit score. Contrastingly to what most people assume, you don’t have a single credit score, and each lender has a different way of calculating your overall score for any given time. This is why it is possible for some people to be successful in applying for a loan with one bank, but unsuccessful with another.

How you Can Harm your Credit Score

Unfortunately for people who struggle to manage their money carefully, it’s all too easy to do damage to your credit score. If you always manage your debts well, then you shouldn’t have any problems when it comes to obtaining credit. However, if you have ever made a payment late on a loan, or missed a payment completely, this will show up on your credit report and may make it more difficult to access financial help. Basically, a credit score is an evaluation of how much of a risk you are to credit companies and banks. It determines whether or not you’re likely to make payments on time.
You could end up with a bad credit score if you ever encounter serious financial problems too. For instance, your credit score is affected by things like county court judgements and bankruptcy.

How to Improve your Credit Score

Although it’s very easy to damage your credit score, it’s not necessarily as easy to repair it. However, there are a number of ways that you can improve your credit score. For instance, you should make sure that you are registered in the electoral roll, and do your best to avoid making too many applications for credit as lenders often avoid borrowers that have been turned away by other companies. You should also make sure that your credit file is updated and accurate.

Often, it’s a good idea to show that you know how to carefully control your finances by managing your debts with caution., A personal loan for someone with bad credit can sometimes help in this case so long as payments are made according to the schedule that has been laid out for you by the company that is giving you the money. As long as any loans that you take out are treat with care, and you ensure that you give monthly amounts on time, you should find that lenders begin to believe that you have learned from your past mistakes and therefore can be trusted with additionally credit again.

Understanding Loans and Financial Difficulties

If you’re struggling to make repayments on your debts, then you might find yourself in a state of panic. After all, sometimes it can feel like there are so many bills to pay, and not enough money to pay them with. Unfortunately, in these circumstances, people often make bad decisions that end up making their spiral into debt far more worrisome, and can lead to greater problems in the future.

The important thing to remember is that while sometimes it can feel as though it will be impossible to get back on track with your loan repayments, there are various options available out there for people in cases of financial difficulty who need help making ends meet. Never simply bury your head in the sand and try to ignore the loan, as this will often make problems worse.

When You’re Struggling to Make Repayments

There are plenty of reasons why some people find themselves struggling to make the repayments that they were convinced they would be able to manage when they first took out a loan. Sometimes you might go through a family crisis that requires extra money, or you might have lost your job, which means that you’re struggling to pay the bills. Whatever the problem, it’s important to speak to your lender as quickly as possible about the difficulties that you are currently experiencing.
It’s worth noting that most lenders want to help you make repayments however you can, and some will allow you to come to an agreement wherein you can reduce your monthly repayments or spread them out over a longer period of time. For a short amount of time, you may even be able to pay just the interest on your loan, and not pay off any of the capital, or work out a debt plan.

The first step in preventing any further damage to your financial situation or your credit score is to talk to the people that you owe money to. These people are often happy that you have contacted them and will be willing to discuss a repayment plan that suits your needs.

Working Out a Budget

Once you’ve figured out a way to make your repayments a little easier, you’ll need to ensure that you’re being particularly cautious with your money. A good way to do this is to draw up a budget that shows you where you’re spending money, and where you’re getting money. Most of us find that there are certain aspects of our lives wherein we can cut back on spending if we need to. Remember to be brutal with your budget, and make cuts wherever possible to free up extra cash.
After you have a budget in mind, you will need to prioritise your debt. In other words, make sure that you have enough cash to get to work and eat, as well as keeping a roof over your head, then you can start finding out how much you can afford to put towards loan repayments. Remember, if you have multiple loans, you will need to prioritise the secured options first, as you could risk losing property or your home if you don’t’ keep up with the costs.

Never Ignore your Debt

No matter how bad things may seem, there’s usually a solution out there that can make it easier to manage the debt you’re dealing with. The most important thing you can do to protect yourself and your family is to make sure that you tackle the problem head-on. Don’t simply ignore the debt, and remember that there are a range of charitable services out there that are willing to offer free advice to people who are struggling with financial issues. Many of these services will be able to give you guidance on which steps you can take to make paying off your debts a lot easier, and could help to put your mind at ease during a particularly stressful time.
Though struggling to make repayments can be a very upsetting thing, there are plenty of people out there, including your original lenders, who are willing to help you if you fall onto hard times and you simply can’t afford to meet the terms that you first agreed to.