Lower Interest Payments

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Chuyển đổi dữ liệu22.09.2022
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When individuals aspire to attain education

When individuals aspire to attain education, then financing education is one of the major concerns. Therefore, to meet the financial requirements of education, the individuals need to devise ways of financing education. One of them is to borrow from family and friends.
If you have family or friends who have offered to loan you the money, this is often a great opportunity to pay for school. Often loans from family and friends come with special perks .

  1. Advantages

  1. Lower Interest Payments

If a bank isn't convinced you will be able to pay back a loan, they will charge higher interest rates to compensate for their risk. This implies individuals with poor or limited credit history may only be able to borrow from a bank or credit union at exorbitant rates. A family member who is aware of and trusts you will be willing to offer you the same loan at a much lower interest rate. Pick an interest rate that's affordable but still gives your family member an incentive to lend the money.

  1. More Flexibility

One of the most critical upsides to borrowing money from family members is that you’re probably able to negotiate more flexible payment options and repayment arrangements. Friends and family are often flexible about when you pay your loan back. They typically have more sympathy about late payments due to being jobless, dealing with an illness, or just going through a difficult time.

  1. A Longer Repayment Period

Just as your family member might be a lot of accommodating than a financial institution or payday lender about the interest they attach to your loan, there’s also a good chance that they’ll be more flexible about the loan repayment period.

  1. Disadvantages

  1. Lack off clarity

The informal nature of loans between family members means that they don’t involve the reams of paperwork usually related to loans from banks and other institutions. This can cause a lack of clarity about the terms and result in misaligned expectations between the two sides. In addition, the loan might introduce tax issues for the lender, which can cause stress and an additional financial and administrative burden.

  1. Damaged Relationships

Borrowing money from a friend is nearly always a slippery slope. Your parents may forgive you if you never repay a $1,000 loan but don’t count on your friendship staying the same – or continuing at all – if you welch on repayment to your best friend. In addition, every spending move you make after taking that loan may be scrutinized by the lender. If you’re making non-essential purchases and traveling while you owe someone money, you can bet the lender will notice and likely resent you for it.
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