Asking Friends and Family for Money: Keep Them Too!
If you are struggling to make ends meet, you may have to ask friends or family for help.
How Do I Ask Family or Friends for a Loan?
It is important to have a relationship with your friend or family member outside of this need. You don’t want to ask a distant cousin oracquaintance because they will feel you are only trying to use them. You want to set aside a time you can meet without interruptions and ask in a well-thought-out way. Remember, when asking friends or family for money, you are asking someone to trust you and do you a big favor.
Mo matter why you are asking for money, treat the process as a business loan. Be especially careful if you are close to the person because it will be easier to take advantage of your relationship. With close friends and family, working odd jobs (like mowing or painting) may count as a repayment option you could ask about. Offer to pay a low interest rate (like 1-2%) to show appreciation and responsibility. Have your current expenses and income listed out. You want to be able to show you are not a flippant spender and you have thought through your repayment process for quick cash loans from friends.
With every loan, you should sign a promissory note or personal loan agreement. A physical agreement is helpful for making sure everyone is comfortable and there is no potential for confusion. Stay in contact with your friends and family throughout the repayment process, updating them on how you are doing. More communication is better than ghosting — even if you are struggling to repay the money. Be honest and responsible.
Who to Ask for a Loan and How?
It can be very hard to ask for emergency cash loans. While you may have the best of intentions, if you struggle to pay back the money quickly, things can get awkward. If you need money and plan on asking friends or family for money, follow these rules:
- Only ask the friends or family you are closest to.
- Only ask people you believe have the money to lend.
- Ask face-to-face if possible.
- Don’t ask anyone that has faced emotional or financial difficulties recently.
- Only ask someone who has had a steady and regular job.
- Be honest and explain why you need money or what the money is for.
- Ask for an exact amount.
- Provide a plan for when the money will be paid back.
How do I Ask my Friend for a Loan?
Asking friends or family for money can forever change the nature of your friendship. Before asking a friend to loan you money, exhaust your other finance options. Look at how much you might end up paying if you took out personal installment loans with an online lender or bank. In most cases, a credit card loan or payday loan will be a very high interest rate. You may be able to ask for money from a friend if you plan to pay them more than they would make putting the money into the bank, but still save money with paying less than you might pay for a credit card loan or payday loan.
If you do agree to terms, make sure your friend agrees to the repayment schedule. If your finances are in order, you may still be paying for some forms of entertainment or unnecessary expenses. You can avoid awkward situations by explaining you will still live life. Tell the friend you will make regular payments and every effort to pay the loan back early, but may still splurge occasionally as your budget allows. You don’t want to feel uncomfortable if you end up going to a movie together while still owing money.
Creating a Personal Loan Agreement
If you were borrowing money from short term loan lenders, you would sign a legal contract for a repayment plan. Borrowing money from friends or family shouldn’t be any different. If you are asking friends or family for money, provide a loan agreement that both parties can sign to protect both of you. The loan agreement should be simple and include:
- The amount borrowed.
- The interest rate.
- The repayment schedule.
- Fees associated to nonpayment or late payments.
- Recourse, including legal action, collateral and modifying loan terms.
The relationship is going to go south if you default and don’t repay the money. If you offer a clear loan agreement up front, you are showing your efforts towards responsibility. As long as you follow the terms and repay the loan as soon as you can, the lender is unlikely to feel any ill will towards you. However, if you stop paying the money or miss payments, the lender is likely to start feeling frustrated and uncomfortable. The contract would serve as proof if a small claims court ever had to get involved. This can serve as additional motivation to keep you on track in your dealings.
When making your personal loan agreement, be realistic in what you can repay. Consider including a clause about what happens if you face a sudden change, like losing your job or if you have medical finance bills because of an emergency. No matter what happens, keep the lines of communication open during the repayment period.
How Do I Ask Family for Money in a Letter?
If you can’t speak to someone face-to-face, letter writing may be your next best option. When you are asking friends or family for money, you want a thought-through and personal touch. Emails and texts are far too casual to use when asking for money. Write a formal letter that is relational, direct and clear.
- Recipients name and address (top left)
- Letter greeting (Dear…)
- Relational paragraph talking about their family or life (well wishes) and introducing your need for cash.
- Explanation of what has changed and why a one time loan amount would make a difference.
- Specific amount of money you are asking to borrow, along with your repayment time frame and interest amount.
- Closing paragraph to summarize your gratefulness and money struggle.
- Your signature
If you are thinking about asking friends or family for money, the first thing you need to do is get your finances in order. Track your expenses and look for places you can cut spending. Some of the easiest places to cut excessive spending include:
Take-out coffee: Start brewing your own. One bag of coffee and creamer is going to cost you the same cost as 2 cups of coffee at a coffee house.
Restaurant dining and fast food: Cook cheap meals at home using ingredients like chicken, eggs and rice that are filling but inexpensive.
Phone plan: Shop around for a plan that trims your expenses each month. You may find a plan that will let you pay only for the data or minutes you need instead of unlimited.
Clearance and sales: Think you are saving money by hitting the clearance racks? Chances are, you are just buying things you don’t need. Make shopping lists and stick to your budget when shopping.
Coupons: Using coupons can save you money or help you spend more. Look for coupons on items you plan to purchase or things you buy regularly. Watch for opportunities to purchase cheaper generic options instead.
Entertainment: Movies, dates, shopping trips, games and other form of entertainment will add up quickly. Look for ways to enjoy yourself without spending money.
Smoking: The cost of smoking regularly adds up quickly. Calculate how much you spend on your smoking habit. You may find quitting is easier when it clears up your finances as well as your lungs.
Drinking: Alcohol can be pricey, but it is incredibly pricey when you are out. Avoid purchasing alcohol for dinner or at a bar. If you want to relax with a drink, do it at home. Chances are, you can buy a bottle of wine or a pack of beer for the same amount as you would spend on one drink in the bar. Soda is the same way.
Another thing you can do if you get your finances in order is look for an actual lender. Keep in mind that when you get a loan from a lender, it comes with an interest. Usually when you borrow money from friends and family, they don’t ask more back. But the lender does. It is important to find a reputable lender who is not going to scam you and who is going to be clear and transparent with you. Loanry partnered with Fiona to bring you these lenders. Put your information in and see if you qualify for a loan:
Realize when asking: this loan is not a balanced transaction. You are asking friends or family for money, which means they are doing you a big favor and taking a personal risk. Take what is offered or politely decline, but do not try to haggle. If you are offered a lower amount of money or a higher percentage than you wanted, you cannot negotiate. And, when you are back on track, make sure you pay it forward!
Ethan founded Goalry, Inc in Dec 2016 with the mission to build the world’s first and only Financial Goal Mall. One place to reach financial goals and comparison shop for any money matter. Taub invents the IP for the finance stores within the mall, while overseeing various aspects of the company. He also has orchestrated the company’s earned media across the finance stores: Accury®, Billry®, Budgetry®, Debtry®, Cashry®, Creditry®, Loanry®, Taxry® and Wealthry®. This includes over 1200 blogs, 400 videos, thousands of social post and publications that have been featured across the web.