How to Borrow Money From Friends

If you are in need of cash, who do you turn to? Going to a friend for help is normally what everyone does. But, mixing friendship with finances has its risks and can often times foil a relationship specially if you are not a 100 percent sure that you can repay what you borrowed. To make sure that you both are on the same page, a paper trail needs to be created, which will explain what amount you will be borrowing, how you will pay it, and how long It will take you to fully pay it.


1. Tell your friends in honesty, why you need to borrow in exact details. Making a draft letter to explain where you will use the money and your intentions would be helpful. This may also give your friends the comfort and ease when it comes to lending you the money.

2. Be exact on the amount you plan to borrow and don’t take in additional funds. Your friends won’t most likely have the same financial holdings as banks have for emergency contingencies when it comes to loans. Determine the exact amount and as much as possible, indicate how you came up with the figure.

3. When borrowing from friends, it is highly advisable to give extra effort on paying more than your agreed monthly payment. This way you can also help your friend better their financial situations while clearing your debts of ahead of your scheduled repayment dates as agreed upon.

4. Be a bit fair, and negotiate or suggest an interest rate that’s agreeable between you and your friend. Most lending arrangements between friends usually become more awkward or uncomfortable because both sides are less likely to ask for more (amount or interest). You can make the loans worth the time and effort though by adding competitive rates with your agreement.

5. Be more legal and trustworthy by writing a promissory note notarized by a lawyer or witnesses. A promissory note will establish the terms of the loans, and legally allows action in court should provisions fall within state laws.

6. If the loans you will be getting is for a business venture (big or small), it will be a great gesture to provide your friends – the one who lent you the money – products from that business, or a possible business opportunity as well. You can use rented equipments, or discounted prices and other benefits to encourage your friends to open their minds in the possibility of investing in your business in a long-term basis.

Tips & Warnings

• Split borrowing with several friends to give less financial burdens on your group of friends. It may be tempting to ask a large loan from one friend who is more than willing to lend you the amount, but it is highly or most likely to lead to resentment. It will also be wise to bring comfort with the environment by bringing your friends together and discussing the situation you are in to instead of approaching them one by one. This way they will also better know how sincere you are with your intentions, and will trust you more.

• If possible, combine loans from other sources along with your friends as well to create a somewhat dynamic portfolio. You should not rely or opt for one source only to avoid excessive interests with high principal.

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