However, this may not be the most correct answer. It is necessary to analyze this subject from different points of view, or more precisely from two points of view: the borrower and the borrower.
Let’s assume that you are borrowing money
In this case, the advantages tend to be greater than the disadvantages. Unless your relative is a legitimate representative of the “heartless and unscrupulous capitalists” group, the interest rate charged will be lower (or even nonexistent…) compared to those in the financial market. In addition, you will be free of taxes such as the IOF and any registration and credit opening fees, among others.
Disadvantages? Well, you will probably need to “promote” your relative, so if he is your cousin, you will have to start calling him “brother.” If you’re an aunt, say, “You’re like a mother to me.” If it is your own father who is lending, “Big Daddy” can be a way out, though not very creative…
Either way you will have to promise your relative eternal gratitude … even if this eternity lasts the same time as debt. There is also the issue of the family relationships. If you fail to repay the debt on time, family life can be severely damaged. While if you default on the bank, it’s usually not a big deal if your manager is no longer your “friend”.
On the other hand, if you are the lender
The situation is more delicate. Firstly, make sure you are really in a position to borrow. Remember that it is not enough to have money left, you must always have a contingency reserve.
Secondly, we must be aware that there is always a risk of default. Even if you are sure that your relative is honest and that he will not default on you, it may happen that he simply cannot pay due to a bad personal financial condition, not bad faith.
In this sense, a good tip is to do a financial “check up” of your relative. Help him analyze if the loan is really needed (due to an impulse buying decision, for example) and pass on Financial Education. You can even condition the loan on the promise that a financial control plan will be followed.
But there are positives
You can get a slightly higher interest rate than you are getting on your current investment. And you will also have gone a step further in gaining a place in heaven, as well as being able to receive a promotion in your “kinship”! But do not fall into the temptation to make this your “breadwinner”, otherwise you will need to analyze the legal implications of this (being accused of “loan shark”).
There are still many other points to consider, but we would like to conclude by saying that an important factor in this type of transaction is to try to do it as impersonally as possible. For example, if your relative refuses to lend you the money, don’t accuse him of being stingy. And, on the other hand, don’t be embarrassed to say no to such a request, especially if he / she has a history of impulse buying. One other thing you can look into is whether your relative has lowered his standard of living to fit the new financial reality. Otherwise lending money will not be much help, it will only increase the size of the “hole” into which it is sinking.
It is not a simple matter to maintain this impartiality
As we are talking about a subject that brings out a strong emotional dose. But don’t let money become more important than a good family relationship. After all, this is perhaps one of the few things we carry from this life.