How To Request a Loan From Family and Friends
It’s hard enough needing money in an emergency but having to ask for help through loans from friends or family can be even harder. Urgent, unplanned needs can cause an uncomfortable “I told you so!” conversation or maybe you have an, ahem, history of borrowing money from friends but not paying them back on time. Or at all.
There is a right way to request a loan from friends and family and, equally important, a right way to ensure a good outcome (the loan gets paid back in full!) so that both parties are comfortable with the arrangement.
There is no need to beg. You can request for a loan with dignity!
Requesting Your Loan
Be truthful. Don’t lie about what you need the money for. Be clear on how much is needed and why; this will go a long way to making the lender comfortable with your loan request.
Offer to pay interest. If you are expecting the lender to loan you money out of the goodness of their heart, you may meet success. However, your positioning will be much greater if you lay out the terms, including an interest rate and when you will pay. Be flexible with the lender as they may have slightly different expectations. If they counteroffer your request, you’re on your way to a successful loan agreement!
Document the loan in writing. The greatest cause of conflict between person-to-person loan lenders and borrowers is lack of documentation. Documenting the loan terms in writing provides clarity on the terms. It also holds the borrower accountable in the event of legal issues and some assurance that the lender will get paid back. As the borrower, don’t be afraid to put your loan terms in writing! If you are hesitant, then you probably shouldn’t be requesting a loan.
Put up collateral. Collateral is something you own (such as property or a car) that you can provide as a guarantee that you will repay the loan. If you default on your loan, the collateral asset becomes the property of the lender. This is known as a secured loan.
Don’t insist. The person you are asking a loan from may not have the funds available and might be embarrassed to admit it. Or maybe they have had prior bad experiences loaning money to people and are afraid to do it again. Regardless, it is 100% their call if they are willing to loan you any money. If they are unable or unwilling, move on to prospective lender number two!
Be a Responsible Borrower
Being a responsible borrower will go a long way to maintaining a strong relationship with the lender as well as ensuring your own financial health.
Pay on time. Don’t be late for a payment and don’t unexpectedly under-pay. Unless you have collateral to offer, don’t request a second loan while you’re still paying off the first!
Communicate. If you do run into a problem paying the loan as agreed upon, let the lender know as soon as possible. Let them know ASAP when they will receive payment and then follow up in writing so that there is a record. Be sure to thank them for their flexibility and then be absolutely certain that you follow through!
Pay back early. There is nothing that pleases a nervous lender more than receiving their loan back early.
In summary, it’s all about being honest and transparent from the onset, plus being responsible when paying back. If you maintain this, you will be a reputable borrower. Borrowing a second time around will be easier once you’ve established trust with your lender.
LendAmi can help you build trust as a borrower because it allows borrowers and lenders to transact loans with transparency. Learn more about how LendAmi can help you request a loan from family and friends here.