Asking family and friends for money can feel embarrassing or shameful. On the flip side, loaning money to a loved one can feel risky or stressful. But the options for small-dollar loans are incredibly limited, especially for those with low or no credit, and it’s tough to see someone you love in a pinch. This lack of resources may help explain why over half of Americans borrowed from or loaned money to family and friends in 2020.
Because this scenario likely has a meaningful relationship tied to it, we recommend reviewing Investopedia’s “How to Lend Money to Family and Not Regret It” or our post on supporting loved ones financially before lending money. As with any loan, there is no guarantee they will repay it, so be aware of any risks and be prepared to say no.
If you want to ask for help, have a clear proposal of how much you want to borrow and how you plan to pay it back. To preserve trust and minimize risk, only ask for a loan if you feel confident you can pay it back. Taking out a loan you cannot afford may put your loved one in a financial pinch and negatively impact your relationship.
If you decide that an interpersonal loan makes sense for your situation, we recommend reading Investopedia’s “Do’s and Don’ts of Lending to Friends and Family.” Here are some key highlights:
Preserving your relationship is often the first concern for people considering lending or borrowing loans from family and friends. That’s why prioritizing communication is crucial to prevent tension and unnecessary strain. Money conversations are hard because finances are a volatile, emotionally charged subject. Here are some mindsets or frameworks to help you move past stigma and shame:
Money Management E-Newsletter: August 2022