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November 2014 - TO BORROW MONEY FROM FRIENDS OR RELATIVES TO CONSOLIDATE YOUR DEBTS COULD BE A BAD OPTION.

TO BORROW MONEY FROM FRIENDS OR RELATIVES TO CONSOLIDATE YOUR DEBTS COULD BE A BAD OPTION.

☳ by Adam Aspilla

When you need money for whatever worthy purpose, the best source of funds are banks because they usually charge the lowest interest rate compared to other lenders. If you cannot qualify to borrow from banks for you could not meet their lending requirements, you can go to secondary lenders like finance companies or private lenders as a last resort.

It is not unusual, when you cannot qualify to secure the funds you need from the sources above mentioned because of your bad credit or low income, some of your friends or relatives may offer you to lend money to consolidate your debts.

It is tempting to accept said offer especially when you are already delinquent on your monthly payments and your creditors are harassing you. If you decide to accept the offer, the risk is you may not be able to pay the monthly payments you agreed upon. The consequence would be your friendship and good relationship you have with your friend or relative who lent you the money would go sour.

A good example is one of the writer’s clients who came to him to file for bankruptcy, for her creditors were hounding her for she was delinquent on her payments. Her situation was ideal for bankruptcy for she had no valuable assets and low income. 

Thus, she decided to file for bankruptcy, as it was her best option. She promised to come back to bring all the documents to finalize her application for bankruptcy. However the writer did not hear from her for about six months.  

After that period of time, she called back, and decided to finalize her bankruptcy application, and to do it quick for the private lender who helped her consolidate her debts had been harassing (to call a police) her for her inability to pay the monthly payments they agreed upon.

The writer found out that she decided to accept an offer of a friend to consolidate her debts for her to avoid bankruptcy.

The above case scenario is a good example of why it may not be a good option for your friend or relative to lend you money to consolidate your debts because of the risk that your friendship and good relationship could go sour when you are unable to pay your friend or relative the amount you have agreed upon.

If are you in financial difficulty that you can no longer borrow from the lenders above mentioned, consider other options like consumer proposal, bankruptcy or debt settlement rather than borrowing money from a friend or a relative.

 

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.