September 24, 2025
Borrowing money from family or friends can sometimes help you if you’re struggling. There’s pros and cons to asking loved ones for money though. We look at the biggest advantages and disadvantages here.
Borrowing money from family and friends can seem like a simple solution when you're facing financial challenges. After all, turning to someone who knows you well and understands your situation can feel less intimidating than applying for a formal loan or using high-interest credit.
Borrowing money from family and friends can be daunting, though. For many, the idea of asking loved ones for financial help brings a sense of embarrassment. It’s not always easy to admit you’re struggling or to place a financial burden on someone you care about.
This goes to say that there are pros and cons to borrowing money from family and friends.
If you’re in debt or struggling financially, there are a variety of things you should think about before asking family or friends for money. It’s important to think about these before asking for money because they affect how likely it is family, or friends will help you out.
If you feel these factors might work against you, it’s worth exploring other options. Consider finding ways to boost your income through side gigs or part-time work or look into financial solutions like debt consolidation to simplify payments and lower interest rates.
In more serious cases, professional debt relief options such as a consumer proposal or bankruptcy might provide a structured path toward financial stability. Consulting with a Licensed Insolvency Trustee can help you evaluate the best course of action for your circumstances.
If you believe that the factors listed above should not stop someone from helping you out, then borrowing money from family or friends can offer some significant advantages.
One of the biggest advantages of borrowing from family or friends is the simplicity of the process. Unlike traditional loans, which require applications, credit checks, and approval processes, borrowing from someone you know often skips these formalities entirely.
Borrowing from loved ones also means there’s often more flexibility in terms of repayment terms and schedules. You can tailor the terms to your specific situation, without needing to worry about rigid due dates or facing penalties for missed payments.
Another significant advantage is the speed with which you can access funds. In many cases, a family member or friend can lend you money quickly—sometimes within hours or days—allowing you to address financial emergencies without delay.
However, while the lack of formalities is a clear benefit, you should treat these transactions with respect and clarity. Setting expectations through open communication can help ensure the process remains smooth and beneficial for everyone involved.
Borrowing from family or friends also often comes with the advantage of significantly lower interest rates compared to traditional lenders. Loved ones are unlikely to charge high fees or compound interest on the money they lend. In fact, they may not charge any interest at all, especially if you plan to repay the loan quickly.
This can provide immediate relief, as a lower or nonexistent interest rate means that every dollar you repay goes directly toward reducing the amount borrowed, rather than paying down interest charges. This can save you a substantial amount of money over time.
That said, even with lower interest or none at all, it’s important to repay promptly and respectfully to maintain trust and preserve the relationship.
When you borrow from family or friends, you benefit from a more personalized and understanding approach. Family and friends are more likely to consider your unique circumstances and individual needs. This flexibility can make a world of difference if you’re facing unexpected expenses or need help getting back on your feet.
Family or friends may be more understanding if you need extra time to get back on your feet. This means if you hit a slight snag in your repayment plan, they may be more willing to be understanding than a bank would be. This reduced financial pressure can make repaying the loan less stressful and help you focus on improving your overall financial situation.
However, this flexibility comes with responsibility. It’s important to treat the arrangement professionally, clearly communicate repayment plans, and follow through on your commitments to avoid straining the relationship.
As we’ve seen there can be significant advantages to getting a loan from someone you know if you’re struggling. That doesn’t mean there aren’t potential downsides though.
Borrowing money from family or friends can put your relationships under significant strain if things don’t go as planned. While loved ones may initially offer financial support with the best intentions, disagreements over repayment terms or delays in paying back the loan can quickly create tension.
For example, if you fail to repay the loan as agreed, they might feel taken advantage of, leading to resentment or arguments. On the flip side, you might feel pressured or micromanaged by your loved ones, especially if they regularly check in about the status of the loan. These dynamics can create emotional stress for everyone involved.
Additionally, financial disputes can impact family gatherings, friendships, and day-to-day interactions, making them uncomfortable or awkward. A loan arrangement that goes sour may not only jeopardize the immediate relationship but could also ripple out to other family members or mutual friends.
If you choose to borrow from loved ones, it’s essential to set clear expectations, communicate openly, and stick to your repayment plan. Otherwise, the financial help you seek might come at the cost of a valued relationship.
When borrowing money from family or friends, the absence of a formal agreement can lead to misunderstandings and unnecessary conflicts.
Money loaned by loved ones often relies on verbal agreements, unlike loans from financial institutions, which come with clear terms and written contracts. The lack of structure can cause confusion about key details, such as repayment timelines, interest (if any), or how to handle missed payments.
Without a formal agreement, you and your loved one might have different interpretations of the arrangement. They may expect weekly payments of a set amount; you may believe you can repay as you're able to.
To avoid these pitfalls, treat a loan from family or friends as seriously as one from a bank. Drafting a simple written agreement, even informally, can provide clarity and reduce the risk of disputes between you.
While borrowing from family or friends may seem like a simple solution, it can create an unequal burden on your loved one, especially if repayment terms are not met as agreed. The person lending you money may face financial strain if they’re unable to recoup the loan when expected.
In addition to the financial impact, there can be emotional stress. You loved one may worry about your ability to repay and feel anxious about the situation. This strain can lead to tension, resentment, or even conflicts that affect the overall dynamic between you and the lender.
It’s important to be mindful of these potential challenges. Before borrowing from loved ones, ensure you’re both on the same page about the terms of the loan and be respectful of their financial situation.
If you feel uncomfortable asking a loved one for money or realize that borrowing from family or friends might not be the best solution for your financial situation, we’re here to help.
Our team of Licensed Insolvency Trustees offers professional, judgment-free advice to help you navigate your financial challenges. We understand that every situation is unique, and we provide personalized solutions to guide you toward financial stability.
Whether you’re dealing with overwhelming debt, facing the risk of losing assets, or struggling to keep up with bills, a Licensed Insolvency Trustee can help you explore options to become debt-free.
Reach out to us today for a free, confidential consultation.
September 24, 2025
Borrowing money from family or friends can sometimes help you if you’re struggling. There’s pros and cons to asking loved ones for money though. We look at the biggest advantages and disadvantages here.
