Borrowing money from family and friends – is it a good idea?

However careful you are with your money, at some point or another, many people end up in a tricky spot financially and need to borrow some cash. Perhaps an unexpected bill arrives in the mail, you lose your job, or something breaks at home that you urgently need to fix. Whatever the reason, you might find yourself thinking about asking friends or family members if they can loan you some money. At the same time, you might be wondering if this is genuinely the best idea. After all, money is one of the most common causes of disagreement among people, and if you’re not careful, you could find yourself at risk of damaging a valuable relationship. 

So is it a good idea to borrow money from family and friends? The answer very much depends on the circumstances. Read on to find out how to do it the right way.

Think carefully about who you borrow from

If you genuinely have no alternative and need to ask a friend or family member to lend you money, then it’s important to carefully consider who you approach. For example, it’s best not to ask someone who doesn’t make that much money themselves or who can’t easily spare the amount of cash that you need without it impacting their life. You should also think about your relationship with the person. How close are you? How long have you known them? Have you helped them out before, either financially or in other ways? Are you always asking them for favors? Are they relaxed about money, or would raising the subject in this way put a strain on your relationship? All of these sorts of factors will impact whether or not you should ask someone for a loan.

Never pressure people

When it comes to approaching a friend or family member to ask if you can borrow money, you should never put pressure on them or use guilt as a way to get them to agree. You should act in the same way as you would for any other business transaction – lay out exactly how much money you need and why, and explain how you’re going to take control of your finances so that you can pay them back in a timely manner. This will help them to feel more confident in your ability and willingness to repay the loan. If they say no, thank them for considering it and leave it at that. After all, they may be facing financial difficulties that you’re unaware of, which prevent them from being able to comfortably loan you the money. Alternatively, they just might not be happy with lending money to a friend in case it harms your relationship, in which case you have to respect that. 

Set clear ground rules 

One of the key steps to take when borrowing money from a friend or family member is to be very clear about the ground rules. Even if the two of you are very close, doing so will greatly reduce the chance of a disagreement or feelings of resentment developing. Some of the factors that you are going to want to consider are:

How much you want to borrow

When you will pay it back by

What sort of repayment system you will use (e.g., how often and how much you will repay)

What happens if you miss a payment

Whether you will pay any interest on the loan, and if so, how much

What you will do if you can’t pay the money back in the agreed time

By discussing all of these issues in advance and agreeing on terms that you are both happy with, you can protect your relationship and still get the help that you need. Remember to be respectful and only make suggestions that you would be willing to accept if you were the one lending the money instead of borrowing it.

Put it in writing

It might sound overly formal and unnecessary, but putting your loan agreement into writing is a good idea when borrowing from a friend or family member. This is particularly true if the loan is for a large amount of money. A written agreement helps you to avoid disagreements further down the line about exactly what was agreed to, especially if it’s going to be a while before you pay back the full amount. Make sure that everything – including interest rates and repayment plans – is spelled out in detail. You should also keep a written record of all the repayments you make to prevent any confusion and ensure you both know exactly how much is outstanding.

Keep to your word

Finally, whatever agreement you and the person you are borrowing from come to, make sure that you stick to it. This is critical in order to maintain trust and a positive relationship. It’s also a good idea to check out a website such as Which? to help you get back on track with budgeting and saving. That way, not only will you avoid having to ask to borrow money again in the future, but if the shoe is ever on the other foot and a friend or family member needs your help, you’ll be in a position to assist.

Advantages of Borrowing Money From Relatives


Many people turn to their families when they are in a tricky spot and need some money. Borrowing money from relatives has many benefits if you know the dos and don’ts of borrowing money and the situation is handled with care. You should also know the dos and don’ts of borrowing money. Here are some advantages of borrowing money from relatives.

Flexible Options

One of the most significant benefits of borrowing money from relatives is that you can decide on a flexible payment and repayment option that will suit you and the lender. This starkly contrasts what happens when you take out a loan from the bank. Such providers often ask for regular payments and seek security for the loan. They also fine you for late payments, which can add to the amount you have to pay back. 


When borrowing money from family, you get to bypass all these troubles and decide when to repay the loan with the party involved. You can also skip a payment provided you explain the situation to them. 

Either Lower Interest Rates or Interest-Free Rates

When you approach a bank or a lender for money, they will charge a low or high-interest rate for the loan because it is how they make a profit. Some banks have exorbitant interest rates on their loans, making repaying and settling your debt difficult. 

When you borrow money from a relative, they may waive any interest charges or settle for a much lower and reasonable interest rate. 

A Longer Repayment Period

A family member will likely be much more accommodating than a bank regarding repayment. You can be transparent about their situation and give them a realistic timeline of when you will be able to pay back the loan. Chances are that they will be much more flexible about the loan repayment period and amount. So, you can repay a chunk of the loan whenever possible. However, you need to be careful, as if you start ignoring their calls, you could damage the relationship. 

Consider your alternatives

Rather than seeing friends and family as your first port of call for a loan, you should take a look at what other options you have open to you. There are a wide range of short term loans available that can get you very quick access to funds, even if you don’t have the best credit score. Just be sure to always choose an authorized and regulated lender. Of course, these have the downside of charging a high interest rate, so borrowing from a friend or family member can be beneficial in that respect. However, it’s important not to take advantage of the person you borrow money from. Another possibility is to simply see if you could save up the money you need by reducing your expenditures in other areas. That way, you won’t be getting yourself into any more debt or putting pressure on a valuable friendship or family bond.