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Asking Your Parents for a Loan

By Edited Oct 14, 2015 2 3

If you know that you will be asking your parents for a loan soon, there are some things you can do to make it more likely to happen. Whether you're a teenager, in your twenties, or fifties, there are some ways to sweeten the pot for mom and dad, so they give you the money you need. Hey, nobody likes to be in a position where they need to borrow money from mom or dad, but sometimes, it just happens. Here are some easy things you can do to improve your odds when asking your parents for a loan

Get a Copy of Your Credit Report:

Many may not think this is important when asking your parents for a loan, but I would disagree. Showing your parents your credit report, and sharing your score with them, will allow them to see why you just cannot use a bank. Get ready for some hard questions. They will be full of "advice" and lectures. This is okay, and it will show that you've taken the time to find out what your score is, so you can make the changes necessary in your life for improvement. If your score is low, asking your parents for a loan may be your only option. If your mom and dad see this, they may be more willing to borrow you the money you need to get by. This will also let you know what types of interest rates to expect.

Make a budget:

If you are asking your parents for a loan, they will likely ask why you are falling behind. Making a realistic budget will help you show them how or why you are falling behind on your bills, or cannot afford dealing with the bank. Get ready for some hard questions, and be honest with your answers. Many try to shy away from this, attempting to avoid the lectures that come with poor money management. Don't let this happen to you, explain your mistakes, how you are learning from them, and what you're going to do in the future, so it doesn't continue to happen. Asking your parents for a loan is hard, but it doesn't need to be impossible. Being honest about your financial situation will only help your cause. Not only will your mother and father see your financial situation, you just may see some problems with your spending as well.

Make a plan:

When asking your parents for a loan, you'll need to explain to them, in detail how you plan to pay them back. Not only do you need a plan for repayment, you need a plan for correcting the situation. If you are constantly falling behind on your bills, how are you going to change it? Perhaps you could look into getting a second part time job. Some may tell their folks they intend to sell off a large "toy" like a four wheeler, so they can eliminate a payment. This shows responsibility, and your mom and dad will eat it up. Asking your parents for a loan is easier when you are making needed changes. Here are some things to show them, so they know you are thinking about the future.

1.Reducing payments by selling off unneeded items. They will like this approach.

2.Cutting up credit cards, so you don't increase your balances, may impress mom and dad. Maybe you can negotiate a credit card debt settlement.

3.Getting a roommate, so your monthly living expenses decrease would be a good option to explore for debt reduction.

Make a contract:

Before you even think about asking your parents for a loan, you will want to make up a contract. Just like a bank, your parents deserve some sort of interest on the money they borrow you. While some may not think this is necessary, it shows responsibility. Don't assume anything when asking your parents for a loan. Here are some other things to consider.

1.Set specific due dates each month. Perhaps each payment would be due on the first of the month. Adjust as needed, keeping a set date each month, like a bank.

2.Choose and interest rate. Six percent seems like a reasonable amount. If the bank is going to charge interest, and your parents get interest on the money in their own accounts, you owe it to them. Asking your parents for a loan is easier if you pay interest.

3.Select the term of the loan. This could be days, weeks, months, or even years. Don't stretch it out too far, but don't make it too short, or your payments will be very high.

4.Include a print out from a loan calculator, you know the exact amount due each month. This will show that you've taken the time to determine the exact amounts due.

5.Type the contract on the computer, with lines for signatures. Making it look professional will impress mom and dad.

6.Consequences, like late fees if the payments are late just like a bank would. Add them to the contract so there are no questions about it.

7.Consider paying to have your signatures notarized. It adds a nice "legal" touch, creating an increased sense of security for the lender.

Following through:

When asking your parents for a loan, you want to make sure you follow through on all your promises, just like you would have to with a bad credit personal loan. You never know when you may need to borrow money from your parents again, so holding up your end of the deal is incredibly important. Asking your parents for a loan will be much easier when you follow through on your promises. Under no circumstances is it okay to blow off the payment you owe them, or just expect them to cut you some slack on due dates. If you are responsible with repayment, your mom or dad will take notice, which makes asking your parents for a loan much easier down the road, should that be needed. Keep in mind that a contract could be used in court. Yes, parents can and do sue their children for not paying back their debts. Asking your parents for a loan is a legal matter, in many ways.

As you can see, there are many important things to consider when asking your parents for a loan. Don't expect to borrow money from your mother and father without taking some time to show how responsible you really are.

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Jul 10, 2010 7:01pm
Great article! Thanks, Jason!
Mar 25, 2013 7:03am
Really effective advice, having a credit report, plan and contract agreement would really make a difference in showing how serious you are about the money.

Great advice, and thanks for sharing, thumbs up!
Mar 25, 2013 9:32am
Great article. i believe the more professional you handle the situation, just like any other financial institutional, the better the chances are for them to say yes.
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