How to Borrow from Friends & Family (the right way)

Times are tough right now and as our second lockdown looms, millions of people across the country are experiencing short-term cash flow problems. We’re witnessing a national movement where people are pulling together in their communities to lighten the strain for those who need it most. Just look at what we achieved when Marcus Rashford recently led the crusade to get school meals sorted for the children who may otherwise have gone without.

It’s not that we don’t want to help each other out, in fact it’s the complete opposite. Here’s where the stiff upper lip comes in — as a nation we find it difficult to ask for help and support. Admitting being in a tough financial situation requires vulnerability and an openness that we’re not accustomed to. Let’s look at how we can change that and how we can pool our resources and cultivate a spirit of interdependence.

Whenever there’s a crisis we always extend an offer: ‘if there’s anything I can do, just let me know’. Right now we have the opportunity to follow through on that gesture — and as the saying goes, actions speak louder than words. Instead of turning to the faceless, hollow chambers of a banking institute how about we turn instead to those who care about us most? Those who have no ulterior motive, who have no desire to screw you over but instead to simply help.

This article is written not for those who take the piss when it comes to lending money from family and friends. It’s written for those who struggle to ask for help when they need it most. The ones whose pride can sometimes stand in the way of a simple solution.

The solution to short-term cash-flow problems is much closer than we think and rather than destroying relationships, actually has the potential to strengthen them and bring people closer together. We’ve all heard the sayings ‘don’t lend to family and friends unless you never plan on seeing the money again’ or ‘don’t mix business and pleasure’. Well how about we challenge this way of thinking rather than shutting down a viable and ethical financial solution?

We know it can be daunting to ask for financial support so we’ve put together some ideas to make the process feel more do-able.

Broaching the subject

This is likely to be the most difficult part of the whole process so take strength in knowing that this part requires the most courage. Arrange a time with the friend or family member you would like to approach for a short-term loan. Before asking this person consider their current financial situation and be sure that they are potentially in a position to help. It’s also wise to consider the character of the person too, are they compassionate and understanding by nature? Knowing that your request will be met with an open mind is important.

Leave your ego at the door

Be aware that asking for help requires a degree of humility so watch out for any signs of a wounded ego joining the conversation. Be humble, be genuine and don’t be afraid to be completely honest with your family member or friend about the impact that your financial situation is having on your daily life. This openness fosters genuine connection and is the foundations on which true and lasting relationships are built.

Be organised

Bring along some notes or prepare a spreadsheet showing how you plan to improve your financial situation. At this point you may like to outline the reasons for the loan, how you intend on paying it back etc. This increases the confidence that your family member or friend will have in you being able to pay the money back. It shows initiative, respect and that you’ve gone the extra mile to show how serious and appreciative you are.

Develop good habits in advance

If you’re actively improving your budgeting skills and are taking positive steps towards a brighter financial future, you are showing that you are ready for the responsibility of a short-term loan. Again this boils down to a matter of respect and integrity. Having the right attitude is vital.

Make a solid agreement

Putting the loan terms down on paper in the form of a contract is a wise move. This way both parties understand exactly what is expected of them. Prior to this step working out how much your repayments will be, for how long and with how much interest is crucial. Also working out how the loan will be repaid — ideally this will be done by a standing order bank transfer on a set date each month. Once the agreement has been drafted and everyone’s happy with the terms it’s time to sign on the dotted line.

We recognise that this last step is often where things go wrong for friends or family lending money to each other. Either the contract created lacks the crucial details or it becomes way too much of a headache to put together so falls by the wayside altogether. It doesn’t need to be this way, there’s a better way.

The Punk Money way.

Our aim is to take the cringe factor out of borrowing from family or friends and make it painless. No need to prepare an agreement, calculate payment amounts, we’ve made a simple form for you to fill in. Our free service creates a cash-flow ecosystem within our close networks and communities, providing an ethical alternative to rip-off loans and sky-high interest rates.

Punk F&F can take the hassle out of making your loan happen: you agree the terms over a cuppa and we take care of the rest.

Until next time keep soldiering on Punk comrade.

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