Whether you are funding a small business, financing a renovation project, or needing a down payment for your dream home, you might need to get a small business loan in Ogden to bail you out of financial stress. It might be tempting to borrow money from your close friends and relatives because of its convenience and flexible terms. However, transforming your friendship to a borrower-lender relationship is a risky business and might jeopardize your established connection. Here’s why you should not borrow money from your BFF or family members:
1. The loan might jeopardize your relationship
Financial entanglements can put a strain in even the most solid relationships. If your friends or relatives say no, there is a high chance that you will take their answer personally. You might feel frustrated and annoyed that they refused to give a hand during your financial difficulty. On the other hand, some people might not be comfortable with the idea of lending money, but they find it difficult to say no. They don’t want to feel guilty and appear selfish, so they compromise their finances. But they silently worry about not being repaid and worry about their financial security when unexpected economic perils happen.
Money changes the power dynamics. Your friend or relative who lent you money might feel that they are in control. They become critics of your spending habits, buying decisions, lifestyle, and financial skills. They will resent you for purchasing a new pair of shoes or for the afternoon pizza delivery. Some friends might ask you for some favors, and you will feel obliged to grant their requests. You might think that you owe them more than the money they lent, and you must be careful with your purchase decisions to avoid hurtful criticisms.
If you are unable to pay the loan, your friend might nurture feelings of remorse, anger, and resentment. On the other hand, you will cultivate a great deal of guilt, knowing that you owe her money. In the end, you’ll lose your reputation, her trust, and the relationship.
2. You might not prioritize repaying the loan
Because the lender is your best friend or your sister, you might think that you can take all your time to repay the money. Unlike business loans, borrowing money from friends or relatives does not involve financial or legal threats. Since there are no arranged payment schedules, no interest, and no penalties for late payments, you lose a sense of urgency and motivation to make timely repayments.
3. Demands for repayment are embarrassing
While some people might be forgiving when you are unable to repay your loan in time, your friend might resent you for your missed repayment. When she starts to demand repayment, the situation will cause you discomfort and embarrassment. It’s tempting to avoid your friend to escape the uneasy situation, but she will feel disrespected. If you stop seeing her, she will assume that you don’t have plans to repay her.
Things could get worse if your relative or friend talked about your missed repayments with other people. This situation will not only bring you additional embarrassment; it also gives you a negative reputation.
Borrowing from friends and relatives is a cheaper solution to your financial burden. But the many personal issues that it will cause outweigh this sole advantage.