Alternatives to borrowing money that doesn’t include your friends and family

Man lending his friend money

Alternatives to borrowing money that doesn’t include your friends and family

It can be tempting to ask friends or relatives to lend you money, yet many of us hate borrowing money from friends and family. You need to carefully consider whether you can afford to repay the loan and can cope with what might happen if you can’t.

Borrowing from a family member can provide emergency money and help you avoid forms of borrowing with very high interest rates, like loans and overdrafts

If both parties are confident it will not harm a relationship with a family member if you don’t repay, this is a good option as it usually is interest-free.

If you’re borrowing from a friend, be aware that if you don’t repay, this could end the friendship.

Other credit alternatives

Credit cards

There are a plethora of credit cards out there that can cater to those with good or adverse credit histories. Should you want to buy something on credit and have flexibility in paying it back, then a credit card with 0% on purchases is ideal to buy that big one-off purchase and pay back the amount over an interest-free introductory period.

If you have existing debt, consider a balance transfer credit card. These credit cards are ideal to pay off your debt as cheaply as possible. Some cards allow you to transfer your debts and pay no interest for up to two years. That means they can be a cheaper option for paying off other debts.

Whatever credit card you have or apply for, lenders expect a minimum monthly repayment to be made. Usually, this amount is so tiny that it only covers the monthly interest that is applied to your card.

Thus, you are not clearing the debt, merely the interest. Your debt will remain for years unless you pay more than the minimum monthly amount on your credit card statement.

Personal loans

Loans are a way to borrow some money but pay back a fixed amount every month, so you know precisely what you need to pay and will not change month over month. A personal loan might be cheaper than a credit card over a more extended period or for more substantial amounts. The interest you’ll be charged might depend on your credit rating.

Those who have debts and wish to pay them off as cheaply and simply as possible may consider a debt consolidation loan. This type of credit generally means you pay back less each month, although the loan is typically longer. Debt consolidation loans pay off various kinds of debt and replace the many obligations with one single debt. Borrowers still owe the same amount; however, the repayments are generally lower, freeing up some funds for other purposes.


If you wish to borrow money for a short period with no long-term credit commitments, an overdraft is an option. Several bank current accounts offer overdrafts up to an agreed limit, charging fees and interest.

Remember, though, don’t go ‘over’ your overdraft limit. An unauthorised overdraft not only causes a penalty fee, but the interest is also very high. Another side effect of an unauthorised overdraft is the damage this will do to your credit report.

Overdrafts then are not for longer-term borrowing as it can be costly, and the bank can ask for repayment or reduce the overdraft limit at any time.

Credit unions

The reason people borrow money from their friends and family in the first place is that they are unable to obtain credit due to their adverse credit history. An obvious option is a high-interest payday loan to cover short-term emergencies. (Short-term loans should never be considered for long-term borrowing).

So if banks cannot help you, or you have long-term borrowing in mind, so a short-term loan is not a solution, then an option is a credit union. A credit union is a not-for-profit organisation usually serving a particular community.

Run for and by their members, credit unions offer low-cost loans to them, although it should be noted that borrowers should only borrow if they can afford the repayments.

Final thoughts

Borrowing from friends and family may be the obvious first solution. This can quickly lead to disputes and disagreements, causing the borrower not only to refuse to repay the loan itself but also cause the family relationship or friendship to break down and disintegrate completely.

Before you ask, check whether a credit card, personal loan, overdraft or credit union could be a solution first. Yes, you may pay more in interest, but indeed that is a small price to pay for the sake of keeping your friends and family.

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