Debt Consolidation – Borrowing from Family and Friends

Do you have close relationships with people around you who are in a better financial situation? Family and friends can be willing to assist you if banks and other lenders have turned you down. The best part is, they will not consider your credit score and it’s likely going to be interest-free.

However, there’s a high chance that even the closest relatives and friends will not be willing to lend you money if you share your financial struggles. When they don’t assist, don’t take offense. Lending money, especially to people you are closest to, comes with its dangers.  If you end up failing to pay, the relationship may end. Therefore, many relatives who may refuse to assist may be scared of jeopardizing your relationship. You may have to consider debt relief offered by financial institutions.

Advantages of consolidation by borrowing from friends

  • No long application process and you can easily access the money immediately.
  • No waiting period for the loan to be approved.
  • If you fail to honour your obligation or you make late payments, the relative or friend will not report you to the credit bureau.
  • You can discuss a longer repayment term with your friend or family
  • Your relative or friend exactly understands your financial circumstances and is less likely to ask for a plan.
  • These are people who care about you and are inclined to say yes.
  • They may not be able to afford all the money but the little you get can go a long way in clearing out the debt you owe.


  • For most people, asking for money from friends and relatives is somewhat embarrassing. They feel like everyone will know about their financial situation, which they have been trying to keep as a secret for the longest time.
  • Relationships may be broken if you fail to pay.
  • This form of borrowing often lacks clarity which could result in the lender and borrower clashing because each has their own expectations.
  • Sometimes the money comes with strings attached. This is never the case when you borrow from a bank or an independent lender.

How can you make it work?

First and foremost, come up with an agreement which clearly indicates the amount being borrowed, the interest rates, repayment terms, and course of action should you be unable to repay. Allow the lender to go through your budget and even make suggestions on how to make this work for you.

Someone close to you is likely to take offense if they see you spending money on unnecessary purchases instead of paying off the debt. Make sure you have a plan to use any extra cash that you come across to repay the loan faster. This will show the lender that you can be trusted. Also, be honest and explain to your lender why you are unable to get money from a bank or any other independent lender. If you have bad credit, it’s important to make it clear from the start.