Admit it, relatives are the best option to patch the gaping hole in your financial condition. Although borrowing money from relatives will still feel a little awkward, still convey the reason behind it honestly and openly. In other words, sit down and have an open discussion with them about the amount of money you need and agree on a method for repaying the loan. In addition, make a written agreement to ensure that all parties involved can feel safe, comfortable, and understand the seriousness of your situation.
Step
Part 1 of 2: Preparing to Borrow Money
Step 1. Understand your financial condition before borrowing money
Sit down and try to analyze your spending habits. Observe existing bills and calculate your monthly expenses. After that, try to find ways to cut expenses and increase your income! Specifically, you can start setting up a monthly budget to monitor the money coming in and going out each month.
- Get to know your financial condition as deeply as possible so you can tell the relatives concerned when the time comes.
- For example, if you think you have spent too much money on dining at a restaurant, try changing it by starting to cook at home using inexpensive ingredients.
Step 2. Try borrowing money from someone you trust
Most people prefer to borrow money from their parents first. If your relationship with your parents is also very good, don't hesitate to do it! Remember, you and the relative concerned must be able to trust each other and be able to communicate openly. That's why it's best not to borrow money from distant cousins unless your relationship with them is based on solid trust and communication.
- The higher the trust that underlies your relationship with your relatives, the more likely they are to provide loans.
- Even if you can borrow money by mail or cell phone, you can still do it through face-to-face communication which has proven to be more effective.
Step 3. Do not borrow money from people who are not in good financial condition
Remember, you must consider the financial condition of the relative in question before borrowing money! Do not borrow money from people whose financial condition and/or career is unstable, or to those who have to pay large medical bills. Don't force people who are in a financial burden to lend you money.
Even to friends, never borrow money if they are also experiencing financial difficulties
Part 2 of 2: Planning a Loan
Step 1. Explain the reasons that prompted you to borrow money
In advance, tell the relatives concerned that you need to discuss something serious with them. After that, try to take them to a place with minimal distractions to explain the reason behind your loan. Remember, you must still tell everything honestly in order to build trust and good communication quality, even if they are reluctant to lend the money.
For example, you could say, “Tomorrow I have to pay my tuition, here. Even though now the money I have is not enough to pay the rent for this month's boarding house."
Step 2. State the specific amount you need to borrow
If necessary, bring proof of bills that you need to pay, such as a utility bill or a house rental contract. Borrowing money beyond the amount you need is inappropriate, but even more inappropriate if you have to borrow money a second time because you have asked for too little before.
For example, you could say, "Can I borrow 200,000 to go to the concert tomorrow Saturday?"
Step 3. Prepare an expense budget to manage large loans
If you feel you have to borrow a large amount of money to pay bills or business needs, try to take the time to work out an allocation of funds. Designing a clear and specific budget will not only show you are serious about the relative in question, but it will also be beneficial for managing your personal finances better.
For example, you could set up a budget containing the information, “2,000,000 to pay for electricity, 1,000,000 to pay for daily needs, and 500,000 to pay for transportation.”
Step 4. Describe the length of time you will need to repay the loan
Identify your personal budget or business plan to get the right time estimate. In general, the results will depend on the amount of the loan and the amount of your monthly income. Therefore, retrace your budget and cut unnecessary expenses so that the loan repayment process can take place faster.
- For example, if you only borrowed money to pay for dinner, chances are that the loan will be repaid within a week. However, if you borrow money to run a large-scale business, chances are that the debt can only be paid back after a few months or even a few years.
- Regardless of the amount of money borrowed, and no matter how close your relationship with the relatives concerned, you must treat the loan as a debt in business.
Step 5. Determine the loan payment method
Together with the relatives concerned, discuss how many times the payment can be paid in installments. If the loan is large enough, it's likely that you won't be able to repay it all at once in the near future. Therefore, try to discuss the minimum amount you must pay within a certain period of time, such as every month.
- By doing so, the loan payment process can take place more regularly. As a result, you will never forget to pay the loan or include it in your monthly budget.
- Think creatively! Chances are, your relative is willing to be paid for in an unusual form of favor, such as mowing their lawn. Nothing wrong with asking, right?
Step 6. Offer to pay interest on the loan
Remember, the relative in question is willing to take the risk by lending you the money. Also, think about how much interest they can get if they save the money in the bank for one month. As compensation, try offering to pay interest on a loan at a low interest rate, such as 1-2%, every month.
The offer is a positive way to show your appreciation for the help they provide
Step 7. Discuss the rules regarding late payments
Together with the relatives concerned, try to discuss the rules regarding fines in case of late payments. For example, they can give you a warning or ask you to pay interest according to the agreed amount. Look for rules that can motivate you not to shirk your responsibilities!
- For example, you have to help them with household matters, such as looking after their children when no one is home.
- Determining the consequences in the form of a fine shows your seriousness, while helping all parties to communicate more honestly and openly.
Step 8. Sign the refund agreement letter
Try browsing the internet to find where the letter is referring to. In the letter, include all the details that have been agreed upon by you and the relative concerned, then ask all parties involved to sign it. This process will turn your loan into an agreement that has physical evidence and is binding.
The presence of physical evidence will also make all parties feel calmer, and minimize the risk of misunderstandings in the future
Step 9. Do not cut off communication with relatives while the refund process is in progress
In other words, call them regularly to ask how they are or tell them about your condition as you usually do. If you have difficulty repaying the loan, also tell them about the condition. After all, maybe you can delay payments or find alternative ways to pay off the debt, right?
Tips
- Think of other ways to earn money. For example, you can take LOC (line of credit) or permanent credit that can be used at any time as long as it does not exceed the agreed time corridor, take loans without collateral, sell goods, or work part time.
- Don't try to negotiate! Remember, you are the one who needs the money so you should follow all the rules they apply.
- Treat all gifts in the form of money as loans, unless the person concerned states otherwise.
