Borrowing money is something most people don’t like to do, especially if it is from family or friends.
And there are good reasons for this.
Often, when borrowing from someone close to you, clear lending terms are not defined.
There is no loan agreement letter or loan contract.
You can get a loan from them without a credit check. Additionally, if you are unemployed or have bad credit, getting a loan from a bank is difficult.
While borrowing from friends or family may not be ideal, sometimes it is your only option.
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However, the Zirtue app provides a better alternative when borrowing between friends and family. It helps make the loan terms clear and ensures the money is paid back. Read below for more details about this app.
But first, here are some general guidelines when it comes to lending or borrowing money with people you know.
What to Consider When Borrowing Money from Friends or Family?
When friends or family borrow money from each other, clear expectations need to be in place. Here are some things to consider before any money exchanges hands.
Are There Other Options Available?
Before asking to borrow money from someone close, or offering to lend them money, explore other available options.
- Could they borrow from a bank or a peer-to-peer lender?
- Can the expense be delayed?
- Are there other expenses to save on to come up with the money?
- What about credit cards?
- Typically, this is not a good option for a loan. Take the following into consideration before using it:
- The length of time to pay the debt back
- The interest rate on their credit card
- Any low-interest rate offers
- Typically, this is not a good option for a loan. Take the following into consideration before using it:
- Do they have anything they could sell to get the money?
- Can they make some extra money on the side?
Will They Pay You Back?
When asking this question, there are two things to consider. Trust and means.
Do You Trust Them to Pay You Back?
In essence, you need to do a credit check of your own before you give a close one a loan.
Does that mean you pull a credit report on them?
Of course not, but think about how trustworthy they are in general. And consider how they have met commitments in the past.
If they have a track record of saying one thing but not following through, you might think twice before helping them out.
Do They Have the Means to Pay You Back?
This kind of goes along with the “credit check” discussed earlier, but regardless of how well one’s intentions are, it doesn’t matter if there is no money to back it up.
Ensuring they have the means and a plan to pay you back is essential to layout upfront before any loan takes place.
Have a Detailed Agreement for Any Loan
Regardless of how close you are to someone, whenever borrowing money is involved, it is best to be in a written agreement.
The written agreement should include:
- Amount of the loan
- Length of the loan
- Payment amount and frequency
- Interest rate
- Actions for late payment or default
If a disagreement arises while the loan is being paid back, having it in writing will help avoid it becoming a fight of who said what.
Treat any money matters between friends or family as a business transaction.
Is Your Relationship Worth It?
While everyone typically has good intentions to start with, disagreements about, or failure to repay a loan, creates significant tension in a relationship.
If the relationship means a lot to you, you may want to tell the other person that you are willing to help them find a solution, but that it isn’t you giving them a loan.
According to a Bankrate survey, more than a third of people who helped a friend or family member financially lost money, damaged their credit score, or damaged their relationship.
Zirtue – A Better Way to Borrow Money
Zirtue is a lending app that alleviates some of the stress around loans between friends and family.
It works like this:
- Select your loan amount
- Set the payment terms
- Select the person to request money from
- Submit the request
- The other person agrees to the terms
- Within three days, receive the funds
- Track and make payments
Zirtue ensures the terms of the loan are explicit, including interest rates and payment terms.
No need to write a promissory note, or create a separate contract or agreement. And there is no credit check, collateral, or early payment penalties.
Additionally, all money transfers are ACH bank transfers between the lender and the borrower.
Loan amounts can be between $20 and $10,000. And payback time is between 1 month and 24 months.
Zirtue Fees
Zirtue is free for lenders and operates on a subscription model for borrowers.
All subscription plans include a one-week free trial and provide the following features:
- Unlock unlimited loan requests
- Unlock loan amount limits
- Automatic loan payments
- Direct bill payments
- Priority support
There are three subscription plans:
- Monthly – $5.99/month
- Quarterly – $15.99/quarter ($5.31/month – save 10%)
- Annual – $49.99/year ($4.16/month – save 32%)
Subscriptions can be canceled and any current loans will continue. Additional loan requests require a subscription.
All of the interest charges are paid to the lender each month. Unless you agree to different loan terms, the interest rate is 5% (APR).
Keep in mind that Zirtue is just facilitating your loan, formalizing it, and making the payment process simple.
Zirtue does not guarantee repayment of any loans. That is between the lender and the borrower.
Are you interested in using Zirtue to request a loan or lend money to a friend or family member?
Summary
Borrowing and lending money between friends and family members is a sensitive subject.
Take the steps above if you are considering a loan with someone close to you. Otherwise, use an app like Zirtue to minimize any potential harm to your relationship.
Do you have any experience with loans between friends or family members? How did it work out? Please share in the comments below.
