When faced with an unexpected expense, family members are frequently the best choice for assistance. Asking for money will always be a little awkward, but you can make it a little less awkward by being upfront about why you need the money. Take the time to sit down with your family and have a serious discussion about how much money you’ll require and how you’ll pay it back. Establishing a written agreement will ensure that both you and your family are comfortable with and understands your situation.
Part 1 Getting Ready to Ask for Money from Family
1. Make sure your finances are in order before approaching anyone for financial assistance. Take some time to reflect on your financial habits. Pay close attention to your bills and the amount of money you spend in a given month. Find ways to reduce your expenses while increasing your income. Create a personal budget to help you stay on track each month and stay on track.
Your family will be looking to you for information about your financial situation, so you’ll want to know everything you can about it.
For example, if you notice that you are spending too much money on dining out, resolve to prepare meals at home with inexpensive ingredients instead of eating out.
2. Inquire about loans from people you know and trust. When it comes to money, most people turn to their parents first. If you have a strong working relationship with them, that is fantastic! You and the member of your family who you have asked must have complete trust in one another and feel free to communicate openly. If you don’t have this kind of relationship with your distant cousin, it wouldn’t be appropriate to inquire of them.
The greater the level of trust you have in your relationship with the other person, the more likely it is that they will grant you a loan.
Having a face to face conversation is more effective than writing a letter or talking on the telephone.
3. Asking people who aren’t financially secure should be avoided. Take the time to consider the financial situation of the other person. If you ask someone who is not financially stable, does not have a stable job, or has significant medical bills, it will appear that you are being disrespectful of them. Try not to put additional pressure on someone who is already under a great deal of stress.
Your best friend may be the person in whom you have the most faith, but they are not the person to turn to when they are also having financial difficulties.
Part 2 Setting up the Loan
1. Discuss your reasons for requiring the loan. Inform the individual that you need to have a serious conversation with them. Consider setting aside some time in a quiet environment to explain precisely what you require the funds for. Because of your honesty, your family’s trust and communication will remain strong, even if they are reluctant to lend money.
Suppose you tell someone, “I had to make a large payment on my student loan and I don’t have enough money left over to pay my rent this month.”
2. Inquire with the individual about the exact amount you require. It is beneficial to bring along a copy of the expense, such as a bill or a rental agreement if one is readily available. Even though asking for a larger loan than you require is inappropriate, asking for a second loan because you borrowed too little makes you appear reckless and untrustworthy.
Consider the following example: “I’d like to borrow $20 so that I can attend the concert this weekend.”
3. Preparing a spending budget for large loans is essential. You should take the time to describe how you intend to use the money if you are borrowing large sums of money to pay off several bills or to repay a business loan. Writing a plan that is clear and concise can help you persuade the other person that you are in charge. This is also a great way to double-check that your personal finances are in good working order as well.
For example, the budget might state that $200 will be spent on the electrical bill, $100 will be spent on groceries, and $50 will be spent on transportation.
4. Explain how long you expect it to take you to pay back the money. Assess your personal budget or business plan in order to determine an approximate time frame. This is dependent on the size of the loan as well as the amount of money you have available to you on a monthly basis. It is possible that you will need to go back to your budget and cut costs in order to repay the debt as quickly as possible.
Taking the example of a small amount of money to cover dinner, repayment of a large business loan can take months or even years, depending on the amount borrowed.
It should be treated as a business loan request regardless of the size of the loan or how close you are to the other person who is asking for the money in question.
5. Make a plan for how you will pay back your debt. Discuss the frequency with which you will be required to repay a portion of the money. In the event that you borrow a large sum of money, you will almost certainly not be able to repay it all at once. Create a basic minimum payment schedule with your family for a specified period of time, such as once a month, and stick to it.
The creation of a plan helps you stay on track. You will never forget to pay back the loan or to include it in your financial planning.
Bring your imagination to bear! Even minor household tasks, such as mowing the lawn, may be counted as part of your repayment by members of your family. It’s not a bad idea to inquire.
6. Make an offer to pay a portion of the interest. Keep in mind that the other person is taking a chance with their money rather than spending it as they see fit. Consider how much interest they would earn if they were to leave the money in the bank for a month. Prepare an interest rate of 1-2 percent and add it to the amount of money you owe each month to get you out of debt.
The interest is a positive way to express your gratitude for your family member’s assistance in a positive way.
7. Create a list of consequences for failing to pay on time. You should talk about what will happen if you don’t make a payment on time. It is entirely up to you and your family to decide. It is possible that they will remind you of the loan or charge you an additional fee on your next payment. Try to find something that will keep you motivated to stay on track.
It’s possible that you have a favour or chore to complete for your family, like babysitting your younger brother.
Making a decision on consequences demonstrates that you are taking this seriously and can aid in the facilitation of open communication about what would otherwise be a difficult topic to discuss.
8. Sign a promissory note to secure your loan. You can find sample templates to print by searching the internet. You and your family should write down the specifics that were discussed, and then have everyone sign their names. In this way, your request is transformed into a physical, legally binding agreement.
A physical copy is beneficial for making everyone feel at ease and for clearing up any confusion that may arise in the future, should it arise.
9. During the course of repaying them, keep in touch with your loved ones. Maintain communication with your family members. Call them up every now and then to give them an update on your progress, just like you would normally do. If there is any difficulty in repaying the loan, make sure to mention it as well. It’s possible that you’ll be able to skip a payment or come up with a different payment plan.
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