Borrowing money, regardless of who you borrow from, isn’t like borrowing a book. You’re not just letting it live on your bookshelf collecting dust. (Your lender may or may not be holding a grudge because they lent you their copy of The Sisterhood of the Traveling Pants in 2006 and never got it back.) With money, you actually have to return the dough to your borrower, or you’ll probably be dealing with more than passive aggression.

Deciding how to borrow money can be a big decision. Do you borrow in a more formal way through a loan from a bank, credit union, or online lender? Or do you tap a friend or family member for funds? Here’s what to consider when making that decision, and how to go about it.

Borrowing money from a bank or other traditional lender

When you’re borrowing money from a bank, credit union, or online lender, you don’t have to worry about emotions getting involved. It’s strictly business.

There’s a lot to consider when taking out a personal loan, most importantly what do you need the money for? Looking to consolidate debt? Wondering if debt consolidation is a good idea? Need to renovate your home or make a big purchase? A personal loan can help with any of these.

A personal loan gives you a lump sum of money, and in most cases, you can get access to your funds in a couple of days. Interest rates vary by lender, and the better your credit score, the lower your rate will be. One advantage of a personal loan is you don’t need to put anything up as collateral, so you’re not risking losing your home or car.

But many personal loans come with additional costs—so on top of interest rates, you could also face origination, prepayment, and late fees.

Personal loans are a better fit if you need a larger sum of money and expect to repay it over the course of several years as opposed to several months.

Borrowing money from friends or family

Sometimes you have friends who are just like family. So much so that you’re comfortable enough to ask them for a loan. But borrowing money from friends, family friends, or your actual family can get complicated.

If you’re looking to borrow a relatively small amount—say, a few hundred bucks—borrowing from friends or family can be good because it’s likely a quicker and easier process than applying for a personal loan. You’ll also theoretically be able to pay back a smaller amount pretty quickly.

Borrowing from friends and family can be beneficial if your credit score isn’t up to snuff, as you don’t have to worry about them reviewing your credit history like a traditional lender. A close, trusted friend or family member probably wouldn’t charge you interest, or if they do, it would probably be a lower rate than what a bank would charge. You also should get more flexibility on repayment terms from a friend or family member. You won’t have a formal due date with late fees if you don’t return the money on time—unless your family’s in the mob, and in that case, you probably have more to worry about than paying a few extra bucks.

Of course, you don’t want to take advantage of someone close to you—gangster or not. Financial decisions can cause tension in any relationship, and you don’t want to burn bridges, so it’s important to be especially mindful when you’re borrowing money from someone close to you. Otherwise, holidays could get even more tense than when politics come up.

Your lender probably will want to know exactly what you need the money for and could get upset if they see you making unwise financial decisions after borrowing money from them. When you ask to borrow money, it’s best to be as transparent as possible. Set up clear repayment terms, discuss a backup plan if you’re struggling to pay back the money on time, and if you can, put recurring payments in place to avoid falling behind. Both parties could benefit from signing a written agreement, so if a conflict arises, you can turn to the document to mediate things.

Author’s Bio: Casey Musarra is a reformed sports journalist tackling a new game of financial services writing. Previous bylines include Newsday and Mike Francesa once called her a “great girl.”



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