Do you want to borrow money from family? Borrowing money does not always have to be done at a bank or other financial organization. For example, it is increasingly common that (especially young people) choose to borrow money from their families. This can not only be about the parents, but also about, for example, an aunt or uncle, an uncle and so on. Borrowing money from family naturally has the advantage that you borrow from someone you trust. If things go well, you can also borrow on financially interesting terms. However, it must also be borne in mind that borrowing money from family is not always interesting. To ensure that you have a clear picture of all the advantages and disadvantages that borrowing money from family brings, we have listed them all extensively on this page for you!
Benefits of borrowing money from family
The moment you choose to borrow money from family, there is actually a so-called ‘private loan’. Such a loan is, as the name suggests, not taken out with a financial institution, but with, for example, a friend or a family member. This brings a number of very interesting benefits that we obviously do not want to withhold from you.
In the first instance, borrowing money from family means borrowing money from a person you know and trust. This immediately gives a lot of (potential) borrowers a better feeling than if they chose to use a bank or other professional lender. Moreover, it is not uncommon for a credit agreement between family members to be concluded orally. Despite the fact that this often causes problems in practice (more on this later on this page), it does cause a relaxed feeling. The financial pressure with a private loan between family members is therefore often much less.
The costs are more limited compared to those at a bank
It is often not the intention that the family you grant a loan does to make big profits on the contrary. In the majority of cases, a private loan is concluded between family members as a form of ‘goodwill’. The consequence of this is that the costs can be considerably lower compared to a traditional personal loan from a bank. In the most optimal case, it is even possible that the loan you took out with your family will not cost an extra amount. A family member who grants a loan is not legally obliged to make a profit from it. The credit must be repaid at a certain time. If not, there is a gift and there are strict (er) rules attached to it.
For temporary payment problems, high costs are not immediately charged
The moment a family member shows willingness to lend you a certain amount of money, this usually means that he or she has the best intentions with you. It is therefore often not the case that in financially less favorable times large costs will immediately be charged on the private loan that you have taken out. This of course does not mean that you have to abuse the situation. Try to avoid payment problems as much as possible, but if they do occur unexpectedly, you can usually come up with a solution together with your family member. This is usually a lot less simple with a normal bank, certainly when there is a personal loan.
Disadvantages of borrowing money from family
The above advantages will of course sound like music to many potential borrowers. Nevertheless, it is important to bear in mind that there are by no means just advantages to borrowing money from family. In certain cases, things go completely wrong, causing the bond between the two family members to be damaged once and for all. It goes without saying that you will do everything to prevent this. In order to make you aware of all the possible disadvantages associated with taking out a private loan with a family member, we have also carefully listed these points.
Always prepare a written agreement!
It is very common for a private loan between family members to be granted on the basis of an oral agreement. Of course it is normal that you trust each other, but it is and remains a financing. At the moment that something goes wrong, neither party has the possibility to invoke a certain legal basis, on the contrary. This can ensure that agreements made are distorted, causing considerable damage to confidence. Make sure that you both have the necessary security and always record the agreements made in a private agreement. Only in this way will your good (trust) bond always be preserved!
What about financial problems at one of the two parties?
A natural person is not a financial institution. This means that there can always be a certain situation that causes the lender itself to get into trouble. If you then have a written agreement for the private loan, you can rely on it, but fun is of course different. The same applies to the borrower of the private loan. He can also be confronted with extra costs at a certain moment, which could jeopardize the agreed repayment. In both situations this can cause considerable damage to the bond between the two family members. So there is a chance that your relationship will never be the same afterwards.
Conclusion; borrow money from family, do it or not?
For many people it is not so much a choice, but rather an obligation to borrow money from their family. For example, they may have a BKR code, which means they do not have the possibility to borrow money from a regular bank. If you are confronted with unexpected, high costs, for example, a private loan with a family member can be a welcome solution. The moment you start borrowing money from a family member, it is always important to take into account the possible disadvantages associated with it. Are you experiencing problems at a certain point, as a result of which you cannot repay the loan amount in accordance with the agreement? That could possibly irreversibly damage the bond between you and your family.