Bariatric and Dental Surgery Loans from Family & Friends
Any surgery is an expensive affair and arranging finances for the same can be difficult. Loans from family and friends are a convenient option for those in dire need of dental and bariatric surgery.
Federal Reserve Board states, "Loans from family and friends add up to $89-million per year in the United States".[1]
Top Reasons for Requesting Informal Loans
- Poor credit score.
- No/ limited Insurance.
- Loans denied from the bank.
- Medical/dental tourism surgery abroad.
Steps for Requesting Loans From Friends & Family
- Present your case: Why do you need a loan? How are you going to use the money?
- Decide repayment terms: Either monthly installments or a lump sum?
- Set up a recurring transfer for payments.
- Agree on the lender’s course of action if there is non-payment.
Loan Agreement Between Friends & Family
The loan agreement with family or friends can be formal or informal. It should cover:
- Borrowed principal amount.
- Interest rate (if any).
- Repayment time and method.
Online services such as Prosper Inc. & Virgin Money offer to make arrangements for Loans between friends and family.[2]
Pros and Cons of Loans of Love
| Pros | Cons |
|---|---|
| No forms to be filled | Lack of clarity |
| Low or no interest | Payment default damages relations |
| Flexible repayment | Social Awkwardness |
Individuals take informal loans from other sources, such as moneylenders, because borrowing from a stranger is business-like.[3]
Legal Standing of the Loan Agreement
- Like any loan contract, you’re legally on the hook for the debt.
- Borrowing money is considered a type of verbal agreement.
- It has the same legal standing as many other types of debts.
- With the contract as proof, the lending party can sue in small claims court, get a judgment and then pursue collection activities on the loan.[4]
Quick Tips: How To Approach for a Loan
- Be crystal clear about your own expectations - specify how long you need the money for.
- Be specific about the loan amount.
- Detail the repayment level you can afford.
- Draw up a formal written agreement.
- Plan a realistic repayment schedule.
- If you find yourself struggling to make repayments, be upfront and ask if you can pay smaller amounts or temporarily stop paying until you're in a better financial situation.
According to Mark Beyer, a financial advisor with Edward Jones: “Document everything. As each payment is made, send a confirmation note. It may seem a bit formal, but you will be thankful when a dispute arises over how many payments have been made to date.’’[5]
Focus on Three Key Areas To Protect the Lender & the Borrower
- Protecting your relationships.
- Protecting the lender financially.
- Be sure to check with a local tax adviser before taking a loan.[6]
Conclusion
“Lending money to friends should be done with caution, if at all,’’ said financial expert Ric Edelman, author of The Truth About Money.[6]
Be cautious about loans between friends and family as defaulting in this may sour your relationship forever.
References
- Debt.org: Loan Agreements With Family And Friends
- The Wall Street Journal: How to Borrow from Family and Friends
- FFF.pdf: Financing from Family and Friends
- National Debt Helpline: Borrow from friends and family
- InCharge Debt Solutions: Borrowing Money from Family & Friends
- The Balance: How to Handle Lending and Borrowing Money With Family