In September of 2020 alone, there were over $145.5 billion in outstanding loans in Australia. Instead of taking out a bank loan, many people like to explore borrowing from a mate, or a family member if possible. However, if you’re not careful when doing so, you could make avoidable mistakes that could damage your relationships. Here are five common mistakes people make when borrowing money from loved ones.
1. Not Being Upfront About Why You Need the Money
Be transparent about why you need the money. It is more than likely that the lender will find out what the loan was for and remaining transparent to prove your trustworthiness.
2. Not Being Able to Repay the Money
If you know you won’t be able to repay the money on time, mention it as soon as possible. Trying to avoid discussing the issue or making excuses will only make things worse and this is what many people do. At least 38% of Australians are still waiting to be paid back loans they provided to friends or family.
3. Not Paying Back the Money on Time
Failing to pay back a loan on time, can damage your relationships and make it difficult to borrow money in the future. Additionally, there will be more interest and there may even be financial penalties agreed up front for late repayment.
4. Not Repaying the Money in Full
When you borrow money from friends or family, it’s important to repay it in full. Keep in mind that, on average, Australians have at least $17,000 worth of personal loan debt not including property loans or credit cards. So, if you want your friends or family to remain comfortable lending you money, always pay everything back in full.
5. Not Being Grateful for the Loan
This point often goes overlooked, but if you want the chance to borrow again, express your gratitude. Letting the lender know how much you appreciate their financial help will go a long way in strengthening future borrowing opportunities.
By avoiding these five common mistakes, you can ensure that no amount of money costs you a relationship. Borrowing money from friends or family can be a big mistake if you don’t approach things in the right way. To reduce the potential of that happening, work with a peer-to-peer lending platform like IOU. By streamlining the way that you borrow, you present yourself as more responsible, trustworthy, and financially savvy.
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