Family and friends loan is a common form of finance in Nigeria, especially for small businesses and entrepreneurs who may not have access to formal credit sources. According to a study by ACCA Global, finance from friends and family is one of the most popular types of finance among Nigerian SMEs. However, this type of loan can also have some benefits and pitfalls for both lenders and borrowers. In this article, we will discuss the pros and cons of family and friends loan, as well as some best practices on how to manage it effectively.
As young people, it’s important to have a solid financial plan in place to ensure we’re not constantly struggling to make ends meet. In 2022, we had a Twitter Space based on this topic, hosted by Gbemi O, founder of Gbemisoke Shoes, and loads of people shared their horrible experiences.
Sometimes, we may need to borrow money from friends and family to help us out in a pinch. But how can we make sure we’re managing these loans responsibly and not causing any tension in our relationships?
How to Navigate Family and Friends Loan
Here are some tips to help you navigate the world of family and friend loan like a pro!
- Be open and honest with your lender about why you need the loan and how you plan to repay it. This will help build trust and ensure everyone is on the same page.
- Create a repayment schedule and stick to it! This shows that you’re serious about repaying the loan and will help avoid any misunderstandings or conflicts.
- Prioritize repaying the loan in your budget. Cut back on unnecessary expenses and put any extra cash towards repayment.
- If you’re struggling to manage the loan, don’t be afraid to seek help from a financial advisor or counselor. They can provide valuable guidance and support.
- Keep your friends and family updated on the progress of repayment. This shows respect and appreciation for their support, and can help maintain strong relationships.
- Build and manage a good credit score so you have access to alternative forms of funding in the future. This can help avoid the need to rely on family and friends for loans.
- Keep track of all loan documents and records, including the loan agreement, payment schedule, and receipts. This will ensure transparency and accountability, and can help avoid any potential disputes.
- Be willing to compromise and negotiate with the lender if there are any issues or challenges with repayment. Communication and understanding are key to managing any loan, so don’t be afraid to have an open and honest conversation.
- Show gratitude and appreciation to the lender for their support and trust, and offer to help them in return if possible. A little kindness and generosity can go a long way in maintaining strong relationships.
- Avoid taking out multiple loans from different friends and family members. This can become overwhelming and difficult to manage, so try to limit yourself to one loan at a time.
- Seek out other forms of financial assistance or support, such as grants, scholarships, or low-interest loans. This can provide additional funds to supplement the family and friendship loan and help make repayment easier.
With these tips, you’ll be well on your way to managing your family and friendship loans like a pro. Remember to communicate openly and honestly, prioritize repayment, and seek help if needed. By following these steps, you’ll be able to maintain strong relationships and avoid potential conflicts while managing your loans responsibly. Good luck!
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