In the old days we may have often heard the proverb ‘never a borrower or a lender be’ and it is easy to see why this could be a good thing in many circumstances. Borrowing money is expensive and if you get too many debts they can pile up and get out of control and it can be very difficult to get out of the situation again. Lending money can also be difficult if the person does not pay back and you get short of money. However, this attitude could also hold us back in some circumstances.
If we never borrowed money, most people would not be able to afford to go to university or to buy a house. This would mean that they would continue to live in rented accommodation and may not be able to get such a highly paid job. Therefore deciding not to get this sort of loan could be restricting. However, there are many types of loans which can get us into trouble. Unpaid credit cards, overdrafts, personal loans and similar can be a problem for some people. If they build up so much that they cannot be repaid or it is a struggle to make the repayments then they can be extremely stressful and cause all sorts of financial problems as well.
It can therefore be a big decision to make, as to whether you want to borrow any money. You need to think about whether you need the money, whether it is the right time for you to borrow, whether you can afford the repayments both now and in the future and whether you will be able to cope with the stress of being in debt. This therefore needs to be thought hard about. If you do decide to borrow then it is important to compare different types of borrowing so that you can see which one looks to be the best for you. Compare on price, but also look at other features as well such as how good the customer service seems to be, what the reputation of the lender is like and how flexible the loan is. You may want the option of being able to pay it back early, make overpayments and skipping payments and you need to check whether the loan you are getting has these options. These could make it more expensive though and so you need to decide which is most important for you.
Lending is something that many people do not do. However, some people will lend to their family and friends if they ask them to. There are also possibilities for investors to lend money to businesses, either directly or through peer to peer lending. This type of investment can be quite risky, but some peer to peer lending companies will let you choose how much risk you are willing to take and will pay you a lower return on lower risk and a higher return on high risk investments. Lending to friends and family is very different and the reason some people do try to avoid it is because of the potential problems that can go with it.
Sometimes lending like this is fine. You give someone some money and when they have enough they will pay you back. It could be a causal arrangement that suits both of you. If it is a relatively small amount of money, then it is unlikely to be too much of a problem. Even if it takes a long time to be repaid or is not repaid, if it is a small amount of money, it will not be too much of a big deal. However it could be difficult if they keep coming back and asking to borrow more money and you do not want to keep letting them have it or they want large amounts which you do not want to give them. They might get annoyed with you and it could cause problems between you. It can be even more difficult if someone borrows a large amount of money and does not pay it back. You may need the money back or at least want some of it and they do not have it to give you then they will not be able to repay it when you need it. You could make things easier by agreeing a formal repayment plan that is affordable for them and suits you, but even then, they could decide not to stick to it and this could be a problem.