How to Borrow From a Friend or Relative without Losing the Relationship

By Excel Dyquiangco

When William Shakespeare said “neither a borrower nor a lender be,” he was probably referring to Evelyn Corpuz. The 37-year old, who used to work for a variety show in a television network, learned that borrowing money indeed can pose a hazardous threat to a relationship. Not only is she P30,000 in debt to both her mother and sister, she admits she feels guilty about not paying them back – it has already been over a year since she borrowed from them.

And aside from not having a job right now to pay back the money lent to her, the sad part about the whole thing is that her relationship with her mother and sister isn’t what it used to be. It has become a little bit tainted, all because she is having a difficult time paying her debt.

Sounds familiar? More than not paying back what you owe a friend or a close relative, the risk of ruining a perfectly good relationship is at stake. At one point in your life, you are faced with a dilemma and a scenario. What if you are not able to pay back the money you owe your mother, what happens next? Are you willing to sacrifice the relationship because you have a hard time paying back the money that was lent to you? And the more important question: if that happens, will your relationship with a family member or a friend ever return to normal?

Actually, it can, as long as you are aware of the things that you need to do to get right on track. According to independent financial planner Josefino Gomez, borrowing money from a friend or a relative shouldn’t even be this risky – if you know what to do. He lists down a couple of things that you should remember in order to be a “good” borrower and still keep that bond with friends and relatives intact.

Avoid borrowing in the first place. If you can avoid it, don’t borrow money. Borrowing costs more since it often involves interest. Even if your mom won’t charge interest, the fact that you need to borrow means something is wrong with your finances. It could actually be a sign that you need help with perhaps your spending or saving habits, or both.

Explain your reason for borrowing. Your lender certainly wants to know how you would use the money. Borrowing money must be used as a last resort and certainly not to obtain unnecessary stuff like a new gadget (your father-in-law will certainly not be amused). You can justify asking for a loan for a real emergency, such as hospitalization, or for something that steadily appreciates, like a house or education, but not for more volatile investments like stocks.

Put it on paper. Treat it as any other loan. This should clear up any misunderstandings in the future. Be sure to state the principal amount, interest rate, term, and frequency of repayment. Also add provisions for possible extensions and remedies for failing to keep your promise. You can do away with formalities if the amount is a few hundred pesos. But for more significant amounts, insist on documenting the loan.

Pay back what you owe in any way possible. Be diligent in repaying. But what if, just like in Evelyn’s case, you are struggling to repay? Josefino Gomez says not to run and hide because the lender might think that you have no intention of returning the money. “Just be honest and be sincere,” he says. “If you owe someone P10,000, you should pay some amount back to show that you are sincere. Even P100 a day or a week will show sincerity. After a year (P100 x 52 weeks), you would have paid about P5,200, more than 50% of what you have owed.” Money can be gained or lost easily but once your reputation – and worse your good relationship – is lost, it is hard to get back.

Exercise humility. If your best friend or sister starts nagging you about your loan, don’t get defensive or agitated. Put yourself in the shoes of your lender. How would you feel if you were on the other side of the fence? You can avoid being nagged or even hounded if you show (and not just promise) earnest commitment to repay. Regardless, swallow your pride. You got yourself in this mess, so suck it up. Better, do whatever it takes to pay back and mend your strained relationship.

Establishing your reputation as a good borrower will pay off. Josefino says, “If you have shown your sincerity and have upheld your honor, you’ll reap the rewards of ready money in the future.”