Make a presentation or pitch as to why you need the money. [1] X Research source No, you probably don’t need to fire up a PowerPoint on the projector, but provide your friend with a clear idea of your intentions for the money. You’re taking advantage of (and thus unduly risking) your friendship if you expect “because I just need it” to be a sufficient rationale for your loan. Be realistic about the amount you need to borrow and your ability to repay it. [2] X Research source Do your homework beforehand on precisely how much you need to repair your car, move out of your crummy apartment; take a class to improve your job prospects, etc. And don’t expect “I’ll pay it back as soon as I can” to be enough; project a repayment schedule and timeframe.
Pay interest. This demonstrates your appreciation for your friend’s parting with his/her money and your seriousness in paying it back. Insist upon an amount at least along the lines of the rate for a high-yield savings account at local banks. Otherwise you’re asking for a gift. Offer collateral. This is another way to demonstrate that you are serious about this loan and about paying it back. Offer that TV of yours that your friend envies, or those earrings she always borrows from you. [3] X Research source Discuss missed payment options. Be clear that you will do everything in your power to avoid missing a payment, but have a clear plan in place if it does occur. The alternatives can be as formal as a penalty or increased interest rate, or as informal as offering to do your friend’s laundry or mow the lawn for a month.
If you want to draw up a more formal promissory note, there are guides like this linked wikiHow article available online. If you’re really serious, consider having the document notarized. It doesn’t cost much, and likely makes the document legally binding in your state. [4] X Research source If you’d prefer a less formal document, even an email or handwritten sheet with clearly defined amounts, repayment plans, interest rates, collateral, and penalties is enough to give each side additional comfort and confidence in the transaction.
Is this just a loan, or an equity investment? Does this offer any involvement in the business, or share of any profits (or losses, or risks)? If you don’t want your friend involved in the business, don’t give them reason to think they should be, by making the nature of the loan clear. Alternatively, don’t get them unwittingly involved in a failed business venture.
Borrow from a friend you know well, trust, and with whom you can communicate comfortably about any range of topics. Remember, money can make for awkward conversations, so having a comfort level with uncomfortable discussions will be to your benefit. [6] X Research source
Be clear about the amount of money you need, but present a range of loan options, and take what they offer (or leave it). $2,000 when you need $10,000 is better than nothing, and is also probably better than losing a friend by pressing too hard for more. Refuse the terms politely instead of working for a deal to your liking. Yes, it is going to be awkward to ask a friend for money and then say “no thanks. ” But, that is a wound more likely to heal than making a friend feel taken advantage of through loan conditions with which he or she is uncomfortable. It is better to say that you want to consider all your options again.
Pressuring a friend to lend money is taking advantage of that friend, and taking advantage of a friend is one of the best ways to lose a friend. Even beyond the damage to your friendship caused by pressuring him/her, you are likely to find yourself offered less advantageous loan terms that you will in turn feel pressured to accept. [7] X Research source Just move on to the next friend on your “ask list. ”
Set aside funds each month (or other established time frame) for your payment. Seal the cash in a marked envelope, have money taken directly from your paycheck into an account, set up an auto-pay system, do whatever it takes to make sure that money gets into the lender’s hands each month. Pay the loan off early, even only by a bit, if possible. This is a way to earn a few extra points in the friendship.
Don’t use this as an excuse to avoid talking to your friend/lender about a missed payment, though. Be forthright and clear about your difficulties and options for dealing with them; just do it in the proper context. Contact them, don’t make them ask you for that late payment. If the friendship is your priority, treat your friend with the respect he/she deserves. Be open and honest, in loans as in life.
If low cash flow is a regular problem for you, take the time to examine your household budget and track your spending. There are numerous programs and apps that can help you with this, but a pen and paper can do the job also. Get a clear picture of your financial situation before asking to borrow money. You may find that you have alternatives available to you; at very least, you will be better informed as to the amount you need to borrow and your ability to repay it in a timely fashion.
How to Save Money and related wikiHow articles offer many good ideas on cutting costs, including, for instance, automatically depositing funds into a savings account (akin to tax withholding); eating at home and buying groceries in bulk; saving on utilities by conserving electricity, water, etc. ; negotiating your rent payment down or finding more affordable housing; and finding cheap/free entertainment options (hiking, community events, etc. ). Likewise, How to Get Money Quickly Without Borrowing It advises options like taking odd jobs, selling non-essential items online or at a yard sale, and participating in surveys and research studies.
You may be concerned by the high interest rates, many restrictions, and lack of flexibility you presume you will find with a financial institution. Give banks a look, however; they offer many types of loans and lines of credit that may serve your needs quite well. Also, paying back a bank loan is a good way to build your credit rating. [9] X Research source There are numerous peer-to-peer lending websites out there, which offer you the ability to borrow from (or lend to) other people directly, usually (but not necessarily) anonymously. Do your homework in choosing your intermediary site and your lender, however. [10] X Research source If you have a specific project, plan, or goal in mind for the money, you can also consider establishing a crowdfunding campaign online.
It is estimated that at least 89 billion dollars per year (a 2008 estimate) is borrowed from friends and family in the U. S. ,[11] X Research source and while 95% of Americans say they have lent money to friends or family, 43% of those say they have not been repaid in full. [12] X Research source Money may or may not be the root of all evil, as the old saying goes, but it can easily foster suspicion, jealousy, selfishness, and impulsiveness, among other attitudes that have contributed to the destruction of countless partnerships, marriages, and friendships.
Odds are, your friend has been in a financial pinch at some point, so ask him/her for tips on cutting costs or saving more efficiently. Alternatively, might your friend be able to offer any job leads or money-making opportunities? Ask and see. Let your friend see that you value his/her opinions and have explored all options before asking for money.
