Asking for a loan from a relative or friend can be an intimidating and uncomfortable experience if you haven’t properly prepared yourself and your proposal beforehand. If you are going to approach a friend or relative to ask for a loan, follow our tips below to help lower your blood pressure and increase your chances of a happy outcome.
Get Your Plan Together
The first step is to spend some time thinking about exactly what you are going to ask for and why. Before you approach a friend or relative you should have a clear understanding and rationale for the loan and what you intend to use the proceeds for. You should also make sure that you are being realistic with respect to your ability to repay the loan you are asking for.
Put Yourself in Your Lender’s Shoes
When deciding which friend or relative to ask for a loan, make sure your prospective lender is in a position to help you. If you are looking for $50,000 for a down payment on your first home, approaching your retired Uncle who lives on a fixed income might be a waste of time for both of you. Make sure that your request is realistic from the lender’s perspective. If you are asking for a large amount you may want to approach more than one friend or relative to see if they can split the total amount of the loan.
Create a Formal Proposal
Now that you have a good idea of what kind of loan you are looking for, it’s time to put
together a formal proposal. Putting your request in writing using a professionally formatted document will communicate your seriousness to the lender. When putting together your proposal you should also propose your idea for the interest rate, loan term and repayment schedule. All these points will need to be negotiated with the lender, but it gives both parties a starting point. LoanBack can help you create a professional loan proposal .
Set Up a Meeting
Now you are ready to meet with your prospective lender. It’s always best to meet in person, but if it is not possible a phone call will suffice. When choosing a location to meet, select a place where both of you will be comfortable and be able to speak privately.
Be Open, Honest, and Direct
When you meet with your prospective lender it is critical that you openly and honestly answer all of his or her questions. Even though you have a relationship with your lender, you should treat your personal loan as a business transaction in order to minimize any impact it might have on your relationship.
Formalize Your Loan
If you and your lender are able to agree on the basic components of the loan, it’s time to formalize your agreement and agree on how you are going to track it’s performance. At LoanBack, we have created a suite of products that allow lenders and borrowers to formalize their loan agreement in a legally binding document. After the loan has been funded, LoanBack can be used by both parties to track loan payments and set up payment reminders.