Money and family matters can suddenly become quite complicated. However, the truth is that many of us will experience difficult financial times at some point, whether we’re just starting out on our own, we recently lost a job, or we had some other significant expense come up for which we weren’t prepared, and family members are frequently the first ones we turn to for a little financial support.
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However, there are certain benefits and drawbacks to letting family members borrow money. Here are a some pros and Cons of Lending Money to family member:
Pro 1: Promote financial responsibility
You can impose restrictions on the amount of money you lend, such as the due date for repayment, and you can even impose interest. This works particularly well when lending to teenagers or young adults to help them learn better money management techniques without damaging their actual credit score.
Pro 2: You Might Need Assistance Later
Of course, you shouldn’t give money to family members with the express purpose of borrowing money later. Naturally, you and your family member will have to decide how to reciprocate or ask for favours in the future.
Pro 3: Assisting a Loved One
Family members can occasionally just need a hand. Helping them out can feel good, and they might need a loan for no fault of their own. Nobody wants to watch their family members suffer, so if you are able to provide for them financially, it can feel good to do so.
Con 1: Being referred to as the Family Bank
Family members may abuse your generosity if they know they can always count on you to lend them money whenever they need it. This could result in ongoing requests to lend money to multiple family members.
Con 2: Contamination
Tension and anger can easily develop if you lend money to a family member and they don’t repay you or follow the rules you agreed to, which can make for awkward family gatherings and holidays.
Con 3: Extending Your Financial Resources
Everyone wants to support the people they care about. Although you don’t want to see a family member struggling, there are occasions when you are unable to provide for them. It’s probably not a good idea to lend money if you have to use too much of your credit or run the danger of not being able to pay your own bills in order to give a family member money.
There are some crucial factors to take into account before granting a family member a loan. We have now covered both the advantages and disadvantages of lending money to family members.