When it comes to friendships and relationships, “Neither a borrower nor a lender be.” A famous extract from Shakespeare’s all-time popular drama, Hamlet, here, Polonius shares this advice with his son, Laertes. In the next lines, the Bard further explains why borrowing from friends and family members is always a bad idea. He says, “For the loan oft loses both itself and friend.”
This Shakespearean advice of centuries ago holds true even today.
Reasons why you shouldn’t borrow from friends and family
There are times when you require capital for your business, need a small sum of cash to tide over emergencies, to meet your personal requirements be it buying the new Smartphone in the market or going on a long-due family vacation.
In such situations, it’s common for borrowers to turn to friends and family to help them. After all, isn’t that what friends are supposed to do? To have your back in an emergency?
A big NO! Here are three reasons why borrowing from friends and family is always a bad idea.
1. You put your relative or friend in an uncomfortable position — They might not have the spare cash to lend you or don’t want to give you. Whatever, be the position, they don’t feel comfortable saying a NO to you. This puts them in an uncomfortable position and could lead to your friend avoiding you.
2. Social outings become awkward — Every time you see the lender in a social outing, the situation becomes highly awkward. You’re embarrassed about the person knowing your financial position, and the lender doesn’t know if to bring up the topic or not. This leads to walking on eggshells for both the lender and the borrower.
3. You may end up spoiling the relationship forever — Let’s assume that you’re unable to repay the loan. Or, the lender urgently requires the amount and asks you to repay immediately. Cash is a potential issue that is capable of ruining even the strongest relationships.
Summing it up, borrowing from friends and family is never a good idea.
The Alternative — Borrowing via Formal Channels
Ok, so what do you do, when you have cash requirements? Is there a better alternative to borrowing from friends and family?
YES! You have plenty of options like digital lenders, banks, and other financial institutions. All these are in the business of lending loans to customers. It’s organised and formal.
The benefits of borrowing loans from organised lenders are many. Some of the significant advantages are:
1. You can enjoy tax benefits.
2. Borrowing and repaying the loan on time does wonders to your credit score.
3. Since it’s a regular commitment, you have the added incentive to repay your loan quickly.
4. You can avail even large sums of money, depending on your income levels.
5. Above all, it’s a strictly professional relationship, meaning you don’t lose any friendships in the process.
Here are a few tips to help you get the best deal when you borrow via Formal Channels
1: Choose the right loan type
Personal loans, loans for businesses, loan against property, home loans are just some of the common types of loans available in the market. Do your research and choose the right loan product that matches your specific requirements.
2: Go for Secured Loans to avail better Interest Rates
When you provide collateral you can enjoy great discounts on your interest rates. This lowers your financial burden and makes it easy to repay your loan.
3: Improve your CIBIL Score
Lenders check your CIBIL score to determine your creditworthiness. So, make sure to boost your credit score to improve your chances of securing the loan, and to enjoy better interest rates.
4: Low CIBIL Score?
No worries. Turn to digital lending platforms that offer loans for borrowers with low CIBIL scores based on their business transactions.
5: Consider taking credit in your Spouse’s Name
Don’t meet the eligibility requirements of your lender? Worry not, take the loan in your spouse’s name, or you can even consider joint loans to improve your eligibility.
The Shakespearean advice of “Not borrowing from friends and family” holds true even today. So, instead of souring relationships and ruining friendships, approach formal lending channels and meet your cash requirements, the smart way.