I Owe You One: Why You Should be Careful when Borrowing Money from Friends

Rachael Matthews - 17 Apr 19

We’ve all found ourselves in a tough spot financially at some point in our lives, whether that’s due to the boiler breaking, your car needing a new part or an unexpected bill. You can’t always plan for such events and if you’ve already used up your savings, it can be hard to know where to turn next.

With the cost of living rising more quickly than wages, many individuals are finding themselves in need of a little help should an unexpected or emergency cost arise. Nobody wants to be in the situation of having to rely on someone else to solve their financial woes, and money is a topic many of us feel awkward around, believing it should be kept private.

If you have to ask someone for help, though, friends are likely close to the top of the list. They’re an obvious choice: they’re people you know well and trust with even the most private details of your life, they’re usually happy to help, and won’t charge you interest or fees!  But, while borrowing money from friends can solve your financial woes, it can also come with issues of its own, like putting a strain on your relationship.

Reaching out and asking for help is sometimes unavoidable and it’s always best to ask somebody you trust, but be sure to consider these few key points before you go cap in hand to your besties:

1. Make sure that you’re both completely clear what you’re entering into, whether this money is a loan or a gift, and if there are any caveats that you each need to bear in mind. For example, does your friend need the money back by a certain date?
2. Set clear repayment terms so there’s no confusion over what money will be paid back and when. This will alleviate any bad feeling and help to manage your friend’s expectations.
3. All the details discussed should be written down to make a formal agreement that is then signed by both parties. It might seem a little over the top, but setting out ground rules and having them in writing will help if any conflicts over the money arise later.

Following these tips can help make borrowing from friends easier on you both financially and protect your friendship, but it is still a risk. If you decide that it’s not for you, there are alternative routes you could go down.

Take out a 0% credit card

Taking out loans and credit cards should only be treated as a temporary solution to any financial hardship. If you need to pay out for car repairs, for example, then you could consider applying for a 0% interest credit card. You need to ensure you pay back the full balance before the end of the 0% interest period, and if you continue to use the card, to pay it off in full each month, otherwise you could find yourself in more debt.

Look into a short-term loan

Similar to the credit card option, taking out a short-term loan like the ones on offer at sunny.co.uk should be seen as a last resort solution to get you out of a tricky spot. If you’re faced with an unexpected bill with a payment deadline you’re unable to meet, a small loan that you can get access to quickly could help you. It’s important that you pay back the loan as soon as possible and that it is only used to handle a financial emergency.

Extend your overdraft

It’s not an ideal solution, but you could arrange an appointment at your bank to discuss the possibility of extending your overdraft to foot your bill. Once it’s all paid for and your finances have bounced back, you could reduce the overdraft, or even better, get rid of it.

When it comes to money you have to carefully consider all the options available. Make sure that whichever route you go down, you feel comfortable with the decision you’re making and you have a plan of action to get back on your feet.

Rachael Matthews

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