Essay Sample on Disadvantages of Borrowing Money from Relatives

Introduction

It is common for people to perceive family members, relatives or close friends as dear people in their lives hence in case they lend money to one of them then they may not return it in time or sometimes not refund completely. In most societies, social relationships amongst kinsmen and friends are considered more compelling than monetary issues hence even if a person blatantly fails to repay, the lender cannot do nothing but forget about the issue over time. Thus, borrowing or lending money to relatives presents various disadvantages and may expose one to unexpected fiscal problems. These disadvantages of lending included, the borrowings are often open-ended as the two parties involved in the agreement do not reach for repayments timeline (Slide, 2019). Moreover, the lenders often do not know when their money will be refunded, and the borrowers do not know when the loan should be repaid. This action leaves both parties in limbo, and no expectations are set. Therefore, this uncertainty can at times lead to stress on the borrower and the lender on the dates of repaying or whether they will be repaid (Slide, 2019).

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Additionally, loans given out to family members are always not a priority as the borrower does not know that there is a sense of urgency in repaying the loan. Without a specific deadline, refunding the loan is always the last priority of the borrower, and he or she will not face any repercussions when they fail to repay, make late payments or an impact on the credit score that is negative. Thus, without penalty threats, the borrower will never have the motivation of taking the loan seriously or putting any urgency around repaying it (Slide, 2019). Nonetheless, it is always difficult to ask for the money back as the lender cares about the borrower and they do not want to feel awkward. In most cases, the lender may continue worrying about repaying the loan and thus, shut down some forms of communication with the borrower to avoid including the loan on any topic. The borrower, therefore, is left confused and hurt feelings may result (Slide, 2019).

Also, when money is lent, the borrower is often the servant to the lender according to Proverbs 22:7. The borrower is forced to please the lender in all possible ways when they are close to one another. Additionally, when a loan is given out to friends, family members or relatives, the loans do not earn any interest but only costs the lender. The lender feels like it is too much to ask for interest from a loved one and is forced to ignore on asking for an interest (Slide, 2019).

Alternatives for Dennis and Nancy

The best alternative that the young couple might opt for is renting a house that they can comfortably pay with one's portion of the basic salary so that in case one person loses his or her job, they will not face numerous challenges in paying rent. At times living with a family member might be a burden to the house owner and the couple might feel uncomfortable and shorten their stay. Moreover, with the Canadian rates of payment, Dennis should find a house of approximately 18,000 dollars, assuming that his basic salary is 64000 dollars. The remaining amount might be used in house requirements or savings while he continues to look for more money in his extra working hours. With the five-year fixed salary, Dennis should be able to pay the house more comfortably at 496500 dollars than the monthly rent payments which can help him save more money.

References

Slide, C, (2019). Credit and Debit. 10 Reasons Why You Should NOT Lend Money to Friends & Family. Money Crashers.