Friendship and money, they say, should be kept poles apart to maintain the relationship’s sanctity. The Money Times explores ways of asking your friend to lend you some money in dire situations.
An IOU should have the following contents:
-Should have the borrower’s and lender’s full legal names.
-Should mention the loan amount in full.
-Should clearly mention the time period of the borrowing, including loans dates and specific loan period
-Should mention clearly the interest rate on the loan, the final amount to be paid and other conventions
-Should bear the borrower’s fingerprint or hand written signature.
No matter how close you are with your friends, there is one evil that is capable of pulling your hearts apart and drawing distances between them, MONEY.
This five letter word is said to be the root of all evils and not without reason. So, the million dollar question is, can your friends become your lenders of last resort? And if yes, how can you ask them for the money without spoiling the delicate equation that you share?
Here is a step-by-step guide on borrowing from friends:
1. Share Your Problem
It is only logical to begin by discussing your financial problem with your friend/s. You can call them to meet you in a quiet place or your own residence.
Explain at length all the options that you have tried so far, and wait for their response.
Face, is said to be the mirror of your mind, so start looking for hints in their facial expressions. If they are indeed your true friends, they should themselves offer help. Even if they are themselves not able to help, they might be able to suggest their contacts, who might be useful.
2. Disclose Your Exact Financial Requirement
First disclose the total amount that you will need. Don’t expect your friends to solve your problem at the snap of a finger.
Tell them about the alternative ways that you have thought of in order to procure a part of the amount. Give them a chance to volunteer whatever amount they are capable of lending.
At this juncture, it is important to understand that your friends too would have financial liabilities to fulfill, so try standing in their shoes before you utter anything.
3. Think of a Carrot
The best way of motivating anybody to lend you money is to link it with a suitable reward. Remember this ‘carrot before the mule’ must have enough value in the eyes of the person being offered.
For example, if a particular friend is really fond of an antique pot at your place, be ready to part with it. If it is a business that you need the money for, you can offer them a certain part of your profit or partnership.
Just make sure that you are smart enough to think of something that your friend cannot afford to refuse.
4. Mutually Agree Upon the Rate of Interest
To make the borrowing sound just and justified, remember to speak to your friend of a certain rate of interest that you can mutually decide.
Broaching this subject will in itself make it clear that you mean business and do not wish to exploit your friendship for personal gain. It can hence have a serious bearing on your friend’s willingness to lend.
5. Sign an IOU
Another professional approach is to sign a promissory note or an 'I Owe You' (IOU), which lays down all the agreed upon terms and conditions of repayment in black and white.
With such a paper dully signed by you, your friend is bound to feel more confident in lending you the desired amount.
The importance of such a document increases in view of the delicate relationship that you share.
6. Pay Back in Time
Do as you promise. Make sure that all the repayments or installments are paid in time. Make sure there is no negligence on your part in abiding by the terms and conditions mentioned in the promissory note.
Keep track of all the due dates and prepare yourself well in advance to meet your dues in time.
With friends, make sure you follow the adage: honesty is the best policy.