Why it’s Always a Bad Idea to Borrow Money from a Family Member

If you’ve ever borrowed money from a family member, then you’re probably familiar with all or most of what we’re about to discuss.

Indeed, many people assisted family members with the expectation of being reimbursed. The unfortunate reality is that you may never see that lent money again. What’s more, your relationship with that family member may suffer as a result.

The following are some of the most frequently cited reasons why you should never lend money to a family.

It Can Put Relationships Under Stress

When you lend money to a family member, the borrower may have a less favorable attitude toward the loan than they do toward loans from banks and other lenders. The two parties may have divergent expectations, which may not work out well for everyone.

Money may complicate relationships, and there are times when the resulting harm becomes unmanageable. The tension in the relationship may even result in its termination.

It May Affect Your Financial Situation

When you lend money to family members, your relationship with them is seldom the only thing that suffers. Your credit and bank accounts may potentially suffer significant damage.

As previously said, there is a good probability you will never see that money again. Due to your strong relationship, your family member may view the funds as a gift rather than a loan.

Even if they are aware that it is a loan, they may believe that there is no reason for them to repay it immediately. While this may not be a concern with minor loans, it may jeopardize your future plans and money if larger sums are involved.

Enables Bad Habits

There are occasions when lending money to family members is not the greatest way to assist them, particularly if they are having difficulty managing their finances. While this may provide a temporary solution, it will never resolve their long-term problems.

While you may need to provide them a hand in repairing their roof, for example, and a loan may be necessary, you would want them to develop healthier and more responsible money habits. When kids understand how to manage their money, the likelihood of borrowing becoming their permanent answer decreases, while also maintaining your relationship with them.

It May Leave You Cash-Strapped

If you obtained the funds to lend to a family member, there is a possibility that you intended to spend them for anything else. It could be a portion of your emergency money or savings. Always consider your own financial situation first before lending money to anyone, family member or not, especially if the funds are already designated for personal needs and aspirations. For all you know, you may not have had the spare cash, to begin with.