Okay, today we are going to discuss borrowing money from a friend or a family member.
I’m going to say it’s a bad idea, if you say you’re going to borrow money that means you’re going to pay it back. It creates a very awkward situation with friends and family when you borrow money.
But if you do have to borrow money in case of an emergency, come to them with the solution not the problem. Come to them and say “I need to borrow $4000, and this is what I’m going to use it for. If you allow me to borrow the money, this is how I will pay it back” and then stick to that no matter what. Remember, lives and relationships have been ruined by family members and friends who borrow money.
Normally, if you borrow money from an institution of any kind, you would be paying interest.
So, it’s only fair if you decide and I’m saying IF you decide to borrow money from a family member, a friend or a coworker that you pay them an interest rate that is slightly higher than the lowest interest rates.
In other words if the current interest rate is 3.5% pay them 4% because they’re actually giving you money from their pocket counting on you to return it.
You should never owe someone $15,000 for 10 years.
I will tell you there are some scary things about borrowing money from friends and family. Let me give you an instance, you borrow $4,000 from somebody so you can buy an updated computer because you don’t have room on your credit card and you don’t have cash.
So, you go to a friend that you know has cash put aside and you say, “I need to buy this computer for my work , I promise I will pay it back. I will give you 4% interest and I will give you $400 a month for the next 10 months.” Your friend is a little uncomfortable, your friend is a little squirmy but says “you know I believe in you, we’re good friends, here is the money.”
Then 2 months later, you have not paid them any money back and you’re on vacation or you buy a car or you’re out spending money at clubs or doing something like that. The only way it is safe to borrow money from a family member, a friend or a coworker is that you have the payback set out in paper, you sign a note and you agree to this and under no circumstances do you break that agreement.
That means if something comes up for you to go to on a ski trip and you owe someone $800 you say to your friends “I’m sorry I can’t go on that ski trip. I owe my friend who got me out of a jam money .”
That’s the way to be honorable, that’s what we do when we have integrity and dignity: we honor our word.