Borrowing from Family and Friends? 8 Tips to Keep it Strictly Business


Posted at Jul 25 2017 11:13 PM | Updated as of Jul 25 2017 11:15 PM

Have you ever had to borrow money from a friend or relative? Personal borrowing is quite common, most especially since many do not have quick access to banks and financial institutions. As a result, friends and family become the de facto go-to places for personal financing needs. Unfortunately, this practice has also become the source of so much misunderstanding, quarrels, and heartache. So many friendships and close relations have been broken because of money troubles.

To avoid this, it is helpful to treat these personal loans with seriousness and sincerity. Sadly, some people treat debts from friends or relatives without urgency, treating it as an informal deal that can be forgotten. This should not be the case, since your friend or relative no doubt expects to be paid in full.

Next time you come knocking on someone's door for emergency cash, or someone comes to you, consider these 8 tips to keep it strictly business.

1.  Set a realistic timetable for paying. Let your friend or relative know when you can pay your debt. Don't promise to pay in a week if you know the earliest you can come up with the payment is going to be in 2 weeks. Your honesty is important as it lets your debtor know if he or she can accommodate your request.

2. Make every effort to pay on time. Prioritize payment of your personal debt over your other expenses. True, your payables are a lot but be considerate. Remember that there is another person who needs that money but cannot use it because it's with you. Nothing can be more irritating to your debtor than to see social media posts of you going on vacations or eating out when you skipped paying your debt.

3.  Offer to pay interest. To compensate your friend or relative for the trouble, offer to pay interest for the debt you have taken. Agree on an interest rate that is realistic. A good benchmark will be the rates charged by banks or credit card firms. However, don’t go overboard by offering ridiculous interest rates that will put you further into debt. Remember, your debtor simply wants his or her money back, more than making interest on your debt.

4. Have a written agreement. Keep money matters formal, no matter how close you are to this friend or relative. A simple written note would suffice. This written agreement lets everyone remember when the loan was taken, how much it covers, when you promise to pay it, and other terms. It is also a good reference should there be any questions afterwards.

5. Always communicate. Once you’ve received the money you are borrowing, keep in touch with your debtor. This will give the person peace of mind, and will not cause worries that you have disappeared with the money. A simple text message every so often will work well. If you change your mobile number, or are moving houses, make sure you let the person know how to get in touch with you.

6. Inform your debtor in advance if you can’t pay on time. If you really can’t pay on the promised date, communicate this ahead of time so that your debtor can make adjustments.  Take some steps to make it easy for your debtor, who is now put in a situation of not having cash when he or she might need it, such as paying a small amount, and clearly communicating when you can settle the debt. 

7. Be ready to take no for an answer. No matter how rich your friend or relative may seem to you, remember that he or she also has obligations and expenses that are equally important as yours. Bear in mind, too, that this person has no obligation to help you, and is extending you an act of kindness and generosity that you should reciprocate by fulfilling your part of the deal - i.e. paying the loan on time.

8. Don’t abuse. Keep personal borrowing to a minimum. Don’t keep on running to your friend or relative for every reason, such as wanting to get a new gadget or buying a dress for the daughter’s prom. That person is not a bank or financing company. Next time you borrow money from anyone, put yourself in the shoes of that person to understand the perspective from the other side.

Remember that borrowing money from a friend or relative is a temporary measure and best to limit to emergencies only. Handle the situation with care and don’t let this “temporary” problem ruin a permanent and long lasting relationship in your life.


Grow Your Money is an editorial partnership between and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.

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