Expats & OFWs: 6 rules in borrowing money from friends and family members

I gave a short seminar about personal finance in the church one afternoon.  After my presentation there was a question and answer. One interesting question that was raised right after the session: How can one remind a borrower to repay his personal loan or debt?

This is a legitimate concern for most lenders, and borrowing money is quite common among OFWs. Borrowing money, or asking to be paid, can lead to an awkward situation and may strain a relationship if the expectations are not met.

Borrowing money during emergency situations can seem like a more practical option than taking out from any formal lending institutions. Such financial decision can help you get out of a difficult but temporary situation. In addition, borrowing from friends and relatives is quite easier as they usually have no requirements or interests at all.

So what are the things you should remember when you borrow money from friends and family members? Here are the six simple reminders you might want to consider.

1. Borrowing money requires transparency and humility

Talking about personal finance is a personal concern which can be difficult to address as people tend to avoid the topic. Therefore, asking for help requires some level of humility and willingness to be open and honest about your financial condition. When you decide to ask a personal loan from friends, you are given the opportunity to unmask your true financial situation.

Therefore, give an honest rationale to show that the purpose is legitimate. It’s not reasonable to ask to borrow money just because there is a sale in the mall. Explain exactly why you need the money, such as paying bills or other emergency situations. Your friends will understand your financial condition if you become more transparent and realistic.

2. Whatever the outcome, don’t take it personally.

When you approach a friend for a loan, he or she could say Yes or No. Whatever the answer, don’t take it personally—no hard feelings. You must be thankful if your request is granted. However, after you have explained your financial need and the answer is No, you must understand that it may not be the right time.

If you are borrowing from an OFW friend, he may also have some other financial obligations back home. The problem with many borrowers nowadays is that they get frustrated and annoyed when their request is not granted.

3. Set up a clear agreement.

If you are a borrower make sure that you are able to reach an agreement for a timeline for repayments, including the interest rate if there is any. In other words, setting up clear repayment terms, whether written or verbal, is always a smart move.

Failure to do so can create conflicts and other related problems in the future. For instance, lenders don’t know when their money will be returned, and borrowers don’t know when to repay the loans. It’s better to have a few awkward discussions now than to have a strained relationship due to unclear agreements and expectations.

4. Don’t break your promises.

Most healthy relationships have been ruined because of irresponsible borrowers. Oftentimes, they tend to break promises by making repeated excuses even after the agreement had been discussed. Before you make a promise to repay your friend at the end of the month, make sure you are capable of paying the loan on time or within the grace period.

Be realistic by considering how much can you afford to repay and when. If you cannot afford to fulfill your financial obligation in good time, talk to your friends in advance. An open dialogue can create understanding and trust instead of an embarrassing situation.

5. Make sure borrowing is just a one-time request.

We usually borrow money because of the emergency situations—to pay for the hospital bill, repair our car, spend for accidents and calamities, and other emergency situations. These are all legitimate concerns. But if you don’t learn your lesson and don’t save for emergencies, borrowing money from your friends many times can be irritating and annoying.

If you are a responsible borrower, you won’t use a friend or relative as an ATM. In other words, do not always depend on your friends and relatives financially. Learn your lesson if you mismanaged your finances.

6. Do not let debt problems destroy your relationships.

If you lend money to a friend or family member, beware that you may not get your money back and your relationship may never go back to normal. This will cause tension between you and the borrower, and may also cause guilt, remorse, and anger.

Needless to say, any responsible borrower needs to be more sensible about his financial obligation. However, repeated and unfulfilled promises can ruin even a healthy relationship. Never let money destroy the relationship.

Final thoughts

Be a responsible borrower. Always remember the lender may be affected financially if you’re unable to pay on time. If you have trouble repaying the loan, explain your situation to the person who lent you the money and try your best effort to fulfill your financial obligation soon. Remember, having a great relationship and a good reputation are more important than money.

“The rich rule over the poor, and the borrower is slave to the lender.” —Proverbs 22:7, NIV

 Jun Amparo is the author of two inspirational books about personal finance and marriage.  He is nominated as Huwarang OFW 2019, Individual Category, organized by The 700 Club Asia and is currently pursuing his doctoral study in education. He is also a School College Counselor at an international school in Thailand and a founder of https://www.richlyblessedtoday.com/