The Dangers of Borrowing Money

Posted on Wednesday 28 March 2018

Virtually everyone has found themselves in a sticky financial situation. Unfortunately, it can happen to even the best of us. Sometimes emergencies happen, unexpected events take place, and without the proper savings, these occurrences can seriously disrupt our budgets and financial health. In cases like the aforementioned, the temptation to borrow money from a relative, friend, or financial institution can be great. While borrowing money has helped people in certain situations, an awareness of the potential and probable dangers is still paramount. Especially when it comes to credit cards.

Interest Rates Can Be Astronomical

Assuming that an individual does not receive a loan from a relative or friend, they are almost guaranteed to owe interest on top of the original amount of borrowed funds. When lending services loan money to customers, they are doing it to help the person in need but also they are loaning out money to help their own company and make a profit. Therefore, in many scenarios, borrowing money can be even costlier than simply going without whatever the borrowed funds were intended for. Nine times out to ten, lending services are not the best places to seek financial loans. It is almost always better to seek out help from a family member or trusted ally. However, even this can come with potential risks and pitfalls.

Personal Relationships May Experience Tension

While borrowing money from personal friends and relatives comes with less financial risk, the act can potentially breed tension within relationships between loved ones. Most people loan money with the expectation that they will be paid back, preferably within a certain time period. Issues definitely have the potential to arise if someone is told they will be paid by within a certain time period and then it does not happen. For this reason, it is important for both parties to have written agreements whenever borrowing money occurs. Although some people may view these agreements as unnecessary, written terms can ensure that both parties are clear and aware of each other's expectations. A written agreement can also serve as a great reference in case one or both people become confused or uncertain of the original terms surrounding the borrowed capital. In the best of situations, a person who borrows money from his or her relatives or friends pays back the money within the agreed upon time. Unfortunately, not all scenarios play out as they ought to. Some people borrow money from loved ones without ever intending to pay it back. Other individuals borrow funds with the intention of returning them at a later date, only to find out that they can't do so for whatever reason. Each of the foregoing instances is very problematic and can engender serious issues. Depending on the situation, relatives or friends may be within their rights to sue the person who has borrowed money and failed to pay it back.

Of course, it's not always possible to borrow from friends or family. In those cases, it can be worth trying out online payday loans to get through your financial difficulty.

A Final Word

The preceding, potential circumstances are why each person should tread carefully regarding borrowing money. Sometimes going without something is better than finding oneself in massive debt, recovering from bankruptcy or having a treasured relationship ruined. It's always better to educate yourself about finances from an early age. Here are some additional insurance saving tips for your teen and you know what, it just might help you learn a thing or two as well. Plus if you get a handle on money now, it will put you in way better position to start a business, etc. Imagine being part of all those successful businesses who rake it in during the holidays? You can be one of them two if you get the basics right. So don't borrow like crazy, save and find other opportunities to multiply your income.