When you are financially strained, you may seek assistance from friends and family. This is not a bad thing to do because you can meet your spending, savings, and other financial needs with the help of family and friends. Furthermore, money borrowed from family or friends does not require interest if you promise to repay it, which is something to take advantage of before visiting a financial institution.
There are a few things you should think about before approaching a family member or a friend to borrow or ask for money from. First, let’s go over some of the things you should think about before approaching a friend or a family member for money.
Considerations to make before sourcing money from family and friends
You must be prepared before approaching a family member or a friend to ask for money. You should think about or understand what might happen if you pursue this thought. Here are some of the things to consider:
Know who to ask the money from
You may ask for money from a friend or a family member, but you must identify the person from whom you will borrow money. This will help you determine whether the person will understand the current financial situation you are in.
Some people are fine with parting with their money if the money is used to enrich another person, while others are fine with giving money to someone who wants to cover their basic needs, and so on. Given your problem, you’ll know who to contact, and getting assistance may be inevitable.
Keep your expectations low
When borrowing money from a friend or family member, your chances of being rejected are high. It’s best to keep your expectations low, but asking for money won’t hurt. The best way to ask for money is to ask for it in the form of a loan; however, you must still be credible. Credibility provides some sense of assurance to the borrower that you will repay the loan.
If you are repeatedly rejected, it may indicate that you are asking for money for the wrong reasons. The reason for borrowing money should be clear as it will highly determine if someone will borrow you the money or not.
Have an exact amount in mind
You must be specific about how much money you want to borrow or raise from a family member or a friend. When asking for money, you don’t want to start mumbling numbers. Uncertainty about the amount of money required will make your need for money appear unimportant.
If it is a loan then plan on repaying it
The money you obtain from family or friends may be in the form of a loan, which must be repaid. Create an agreement to repay the borrowed loan amount by specifying the repayment period, amounts to be paid, and at what intervals.
Respect the agreement by making timely payments, and if possible, pay before the due date. This approach will assist you in establishing credibility, and as a result, you will be trusted in the future if you need to borrow money.
Now that we’ve covered the factors to consider before borrowing money from friends and family. It’s time to get into our main topic, “10 ways to get money from family and friends during a crisis.”
During a crisis, you must have effective methods for obtaining funds from family and friends. There are ways to accomplish this, which is what this article aims to teach you.
Here are ten steps to source money from family and friends during a crisis.
1. Determine how much you want to borrow
Before borrowing money from friends and/or family, you must first determine how much money you need to borrow. Because you are most likely borrowing for a specific reason, the amount of money you need to borrow will be influenced by that reason.
A quotation can help you determine the cost of a service or good that you want to purchase. The quotation will assist you in determining how much money you will require from friends and/or family after deducting the amount of money you already have.
Determining how much money you require will enable you to request the appropriate amount. You can present the quote to the person from whom you are borrowing and tell them that you want them to assist you. This will lend credibility to the borrowing that you need.
2. Determine whether the funds will be repaid
Because your friends and family want what’s best for you, they might want to donate to you instead of expecting anything in return. When borrowing from family and friends, you are likely to borrow from more than one person, so the terms of the loan may vary.
Do not assume that you have reached an agreement with a family member or a friend unless you have discussed the actual decision. This may lead to a future or present conflict; therefore, set the record straight. To find out what the person you’re borrowing from really thinks, ask if the money should be repaid or not.
If the money was given to you as a gift, you can forget about repaying it and instead thank your friend or family member. However, if the money is borrowed, you must devise a repayment strategy.
3. Make a list of the people you want to borrow from
You cannot go around borrowing money from every friend or family member you have. You must have a strategy in place that specifies who you will approach with your problem. It’s humiliating to tell someone your problem only to discover that the person lacks the resources to assist you or does not understand or agree with your reasoning.
Make a list of the people you intend to ask for money from. These are the people you believe will most likely lend you money if they have it and understand your need for it. You must have a sense of occasion in addition to your list. Ask for assistance at the appropriate time and in the appropriate setting.
You won’t waste time trying to persuade people to lend you money if you have a list. Only a few people you’ve chosen that are likely to assist you will be approached. In some cases, only one person you know is likely to understand your reasons so you might have to stick to that one person.
4. Make your case
When borrowing money from friends or family, it is critical to build your case. There are several approaches to dealing with this, but the most effective is to appeal to their emotions. You know these people, so appealing to their emotions is likely to work in your favor.
However, you must understand your audience; appealing to emotions may not be effective for you. You could try to appeal to their ethos and/or logic. Your appeal will be determined by the reason for your financial need, so you may use one, two, or all of the appeals.
The case you’ve built will help you a lot in getting the money you need. Overselling is something you should avoid. You must also not lie when presenting your case.
5. Make sure you have clear repayment terms in place
Have a clear repayment plan in place when borrowing money. For example, if you borrow R500.00 from an uncle, inform him that you will be able to repay the amount in three equal installments beginning the following Tuesday.
Because you know how much you earn and what your budget is, you must be the one to decide on the repayment terms as a borrower. Leaving the repayment terms up to the lender may result in disagreements and should be avoided because you may default.
Choose to repay the money on specific dates when you know you will be able to meet the repayment goals you set. Being clear will assist you in obtaining the money that you so desperately require.
6. Establish a repayment period
A repayment period is a date or timeline that you establish to repay the amount borrowed. You can create an amortization schedule to detail how the money you wish to borrow will be repaid over time. A repayment period can be any dates that you are comfortable with, so they can be fixed or variable dates.
Because you are dealing with friends and family, you do not have to be unprofessional. Being professional when dealing with family and friends will assist you in repaying the amount borrowed within the time frame agreed upon. If money intended for repayment is not professionally budgeted for, it can be used for other purposes.
7. Determine whether the money must be repaid with interest
Money from family and friends can be in the form of a gift or a loan. If the money is provided as a loan, it may be subject to interest. When it comes to this subject, don’t make any assumptions; instead, ask if you’re being charged interest.
Since relationships and cultures differ, one may be influenced to charge you with interest. Money borrowed from friends and family can earn interest, and being charged interest by someone close to you is not a bad thing.
You will be temporarily dispossessing someone of money that they could be used to earn money elsewhere. As a result, opportunity cost plays a role, which you as a borrower must understand.
8. Sign a contract
In addition to professionalism when borrowing from family and friends, authenticity must also be prioritized. Having a simple, binding contract should be something that you should consider.
The contract will serve as confirmation that you borrowed money from a specific person who has the right to sue if you do not make the agreed-upon payments. You will come across as a trustworthy individual, and it will play as a motivator to repay the money that you have borrowed.
You don’t want to get into a financial squabble with a friend or family member. It must be your goal to make the agreed-upon repayment. If you are falling behind on your payments, talk to a friend or family member about extending the days or giving you a grace period so that you can earn money and make payments.
9. Repayments should be automated
After receiving funds from friends and family, set up an automatic repayment plan with your bank so that you can make payments on time. People forget, and you don’t want to forget to repay someone who has lent you money at a time when you really needed it the most.
Repayment automation will help you avoid missing payments and will allow you to make payments as agreed. Set up automated repayments through your mobile banking app or by visiting your bank.
10. Honour the agreement
The final step is to honor the agreement you made with your friend or family member. Remember, this is the same person you will need in your life, so treat them well. It is critical that you do not lose your credibility, so do the right thing and do not breach the contract.
You could be sued in addition to losing your relationship with a friend or family member. It is in your best interest to try everything you can to make the repayments on time. Knowing that you have agreed on favorable terms to repay the loan, you will not have difficulty repaying the loan.
Obtaining funds from family and friends requires understanding that you are dealing with the most important people in your life. When it comes to money, dealing with family and friends can be chaotic, and when borrowing money, make sure you will be able to repay the money borrowed.
Begin by soliciting donations or gifts from family and friends before requesting a loan. If this method does not work, you can borrow the money. When it comes to borrowing, however, dealing with banks is easier than dealing with family.