Borrowing money from someone you know can affect your relationship for a long time. Exhaust all your financial loan possibilities and explore ways you can make extra money before asking friends and family members for a loan. If you do need to ask for a loan, they'll be more likely to offer help if you can prove you're a responsible borrower.
Have a Clear Plan
Regardless of how close or friendly you are with the person, treat the loan as a serious request. Come prepared with a clear explanation of why you need the loan and how you will pay it back. Have all the details of a repayment plan ready to make the lender feel as comfortable as possible. Your friend or relative might be willing to lend you money without the details, but some people aren't comfortable asking for repayment upfront. The more information they have, the better for both of you.
Know the Risks
Let the friend or family member know any possible problems, especially if you’re uncertain when you can pay the loan back. Honesty plays a significant role when borrowing money from someone close to you. If you’re in dire straits or you don’t know where your business will be in the foreseeable future, being honest upfront helps avoid shock or disappointment later if repayment doesn't go as planned.
Put it in Writing
Show them you’re serious about paying the loan back by offering to put the loan terms in writing through a promissory note or agreement through an attorney. A contract confirms your intention to pay back the borrowed money. This also protects both you and the lender if any legal remedies are needed.
Provide a spreadsheet detailing how much you will pay back and when, whether through a monthly payment plan or a specific time when you will have the loan fully paid off. Including interest on the repayment could even be enticing to the lender. Be realistic so you are able to make payments on that date. Include a periodic reminder on your calendar to make sure your payments are on time.
Offering some kind of collateral makes a potential lender more comfortable. Depending on how much you need to borrow, you could use jewelry, art, or computer and entertainment equipment. You might need your car, but you could include it as compensation in case you cannot pay back the loan due to an unexpected setback.
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