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Need To Borrow Money From Family? Take These Precautions.
By plrprousers | April 2, 2010
When you need a personal loan the local bank is usually the first place you think of. However, sometimes a bank may not be willing to loan you the money that you may need. Another option may be to obtain the personal loan from a family member. Headaches can be caused to all parties involved in the borrowing and loaning process. This can be avoided though if you just take a few simple precautions..
The most crucial thing to consider would be figuring out which family member is the most appropriate one to ask. When extending and accepting personal loans some uncomfortable consequences may arise. When parents loan money to adult children they may feel entitled to know all of the details about the child's personal finances. Beware, parents may then feel the need to make suggestions and comments about your finances. Getting personal loans from a brother or a sister can affect relationships with their spouses.
Prior to asking for a loan the borrower should seriously consider the following:
- Can the person you are asking afford to make the personal loan?
- Will the person agree to make the loan?
- If you do not pay back the personal loan can the person afford this financial situation?
- What type of effect will the loan have on the current relationship?
To make the borrowing process from a relative a bit more comfortable and less risky borrowers might consider making a few suggestions:
- Offer to provide collateral for the personal loan. This will allow the lender to place a lien against the property if the borrower fails to repay the loan and file for bankruptcy.
- Instead of asking for a personal loan directly from a family member, ask if they could help you out by co-signing for a loan through a bank instead.. Doing this makes the loan more official and involves a third party. This can help to counterbalance the emotional affect that the personal loan may have.
- Insist that the personal loan carry interest charges as well as specific terms. Put the agreement into writing and make sure to have the document notarized.
- Make sure to always ask for a receipt for each loan payment.
Following the above steps will increase the likelihood of repayment and will also avoid confusion later.
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