It is common for people to experience money trouble when they are preparing for a divorce or are in the midst of one. While there may be loans from banks and other institutions available to you for things such as education, a car, and your family law attorney’s fees, repayments to an institution can be very difficult to weather as you transition to a one-person household.
One way people handle this situation is by borrowing money from family members or close friends. It’s a huge undertaking that should not be taken lightly, but it may be the wiser move if you have concerns about being able to repay loans to a creditor or bank on a strict timetable right now.
If you feel you need to ask family or friends for money to get you through your divorce, here are some tips to keep in mind.
Make Sure You Are Prepared
It’s important to be prepared when you are approaching a friend or family member for money. Track your spending, set a budget and follow it, and try to negotiate with your current creditors to get better rates. If you still need help after doing all of that, you’ll be able to approach your family member or friend in a good position.
There tends to be an element of guilt surrounding asking for financial help, even when it’s really needed. Since you will be able to show whomever you are asking for money that you are trying to control and improve your finances, they’ll be more likely to assist.
Insist on Paying Interest
Reject any offers of an interest-free loan, even from a well-meaning relative or friend. An interest-free loan is really a sort of gift, and that could cause resentment down the line. It’s always better to pay interest when you borrow money from a friend or relative. To determine an interest rate, take a look at current rates through lending providers such as banks and come up with a reasonable and fair number.
Create Loan Documentation
Of course, it’s up to you and the person lending you the money whether you want any paperwork for the loan. At the very least, you should have a payment plan or schedule of some sort in writing. This helps set clear expectations regarding how much is owned and when it is due.
If you think there could be times when you will struggle with repayments, be sure to address that with the person lending you the money up front. You don’t want them relying on your repayments to balance their own budget if you know there’s a chance you may not always pay on time. You may be able to create a schedule that reflects those possible problem points.
Protect Your Relationship
Don’t let the personal relationship you have with the person you’re borrowing from become just a financial one. Your money trouble shouldn’t last, but your relationship should. After you pay the loan back, you’ll still want to have your family member or friend as before. Protecting the bond means you need to be able to separate personal and business matters. With that degree of separation, you can avoid things like guilt and resentment.
It’s never easy to ask for financial help, especially from friends and loved ones. However, when you’re dealing with the financial troubles that sometimes come with divorce, it may be far easier and more affordable to work with a person you know rather than a big bank. Take the time you need to think the matter through before asking so you are approaching the request with all the facts in mind.