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• The most difficult loan to handle is the one from family and friends
• Why we borrow from family and friends
• The dangers in doing them
• Why it is important to have to clear communication when lending to or borrowing from family and friends
• Quote of the lesson

When I hear stories of people getting out of debt,
\\n the debt that gives them the most trouble is often a loan from a family
\\n member or friend. Giving or receiving loans from relatives or friends
\\nsounds like a good idea, but if you aren\\u2019t careful they can easily turn
\\ninto a nightmare and easily lead to a ruin relationship.

Now most
\\nof you know I don\\u2019t recommend borrowing for anything, but what if you
\\nare already in the position of owing money to friends and family or are
\\nconsidering loaning money to a relative to help them get through a rough
\\n spot?

Today\\u2019s lesson we cover why it can be enticing to take out
\\nloans from family members and friends, discuss the dangers in doing
\\nthem, how to handle these loans in the debt snowball, what happens if
\\nyou can\\u2019t pay back a family member or friend, and a special discussion
\\nabout co-signing and student loans.

Giving and receiving loans
\\nfrom a family member or friend occur often because it is easier to do
\\nthen go to a bank or lending institution and go through all the
\\npaperwork and hassle. Perhaps you have bad credit and aren\\u2019t able to
\\nqualify for a loan from anywhere else. Or with low saving interest
\\nrates, you can make more by loaning it out to someone and get a better
\\nreturn than keeping it in a savings account in addition to \\u201chelping\\u201d out
\\n someone you care about.

However they often don\\u2019t work because
\\nsince they are family or friends you don\\u2019t do the proper documentation
\\nand have a hand shake agreement. But after a few months go by, the \\u201cpay
\\nme back whenever\\u201d lender gets tired of not having his money back and
\\nseeing the borrower post on Instagram and Facebook about the nice dinner
\\n or vacation they just had. The leads to bitterness and resentment and
\\nat best leads to a strain in the relationship and at worse a total
\\ndisolvement of the relationship and leading people to not talk for
\\nyears.

In addition giving out a loan might not actually be a help
\\nto the individual, it might actually harm someone. Quite often these
\\nloans are given in a crisis situation due to a job loss or medical event
\\n and are used to not miss a payment on a car or mortgage.

But is
\\nthis loan you are giving to them actually going to help their situation?
\\n Or is it just going to perpetuate the problem of poor financial
\\nmanagement? That is something that needs to be considered before lending
\\n out money.

Since they cause a lot of strain on relationship I
\\nrecommend treating them a little differently in the debt snowball. If I
\\ncan move them up and pay them off sooner I would try. For example if you
\\n owe your in-laws $5,000 and have a $3,000 credit card balance I would
\\ntry and pay off the $5,000 first, as long as you can make your own
\\nminimum payments. However if that loan from the in-laws is $20,000 I
\\nwouldn\\u2019t move it up the debt snowball.

What happens if you can\\u2019t
\\npay? Well then you need to have clear communication with the lender and
\\ngive them your entire financial picture and share why you can\\u2019t pay them
\\n at that'