Should You Borrow Money from Friends and Family in Hard Times?
- Borrowing from friends and family can be cheaper and more convenient.
- Get a loan agreement in writing, and keep a record of your payments.
- If your debt is unaffordable, debt relief could be a better option.
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Friends and family are the people you can count on. You’re there for each other when one of you needs moral support. And sometimes, you turn to your inner circle for financial support. But as normal as this is, you may go back and forth on whether you should borrow money from friends and family.
You wouldn’t be the first person to ask. Nearly one out of five of Americans age 15 and up has borrowed money from family or friends, according to World Bank Group. Let’s dive into how to decide if this is a good idea, the pros and cons, and other ways to borrow money.
Should You Borrow Money From Friends and Family?
There’s nothing wrong with asking a friend or family member for a loan. If you’re going through hard times, you may be pleasantly surprised at how much your loved ones want to help out.
Before you decide, take some time to think about what you can do on your own. A loan from someone you know could be your best option. Or you might be better off borrowing money elsewhere or looking into other ways to fix your situation.
Maybe you have a lot of credit card debt or other high interest debt, and you’re not able to make your payments. Some creditors have hardship programs available for clients in this situation. If you haven’t already, call and ask if your creditor can help. You might not need to borrow money from anyone.
With large amounts of debt, also consider whether a relative or friend could lend you enough to get back on track. If so, you could ask them for support. But if your debt feels overwhelming, a professional debt settlement company is probably going to be more helpful.
Pros of Borrowing From Friends and Family
A loan from a friend or relative could be convenient and more affordable than what you’d get from any other lender. Here are the positives of borrowing money from friends and family:
Trust is already established. An existing relationship means the other person knows and trusts you.
You have more flexibility. Together, you and your friend or loved one can figure out a payment schedule that works for your budget. Banks and other lenders are often more rigid in the terms they can offer.
The interest rate could be lower. Your friend or relative may offer you a low interest rate or even not charge you interest at all.
Your credit score doesn’t matter. Most lenders check your credit when you apply for a loan. Someone who knows you probably isn’t going to ask for your credit history before they loan you any money.
It’s easier than borrowing from a bank. Financial institutions may ask for quite a bit of information and paperwork as part of the loan process. Asking a friend or family member for a loan, on the other hand, is something you can do as part of a regular conversation.
Cons of Borrowing From Friends and Family
A loan between friends could have consequences, although many issues are avoidable with proper planning. Here are the potential downsides and what you can do about them:
Expectations could go unmet. This is a common issue with informal loans, and the lender could feel let down if repayment is slower than they expected. Set up a payment schedule to avoid misunderstandings.
Negative feelings can come up. You might feel awkward, embarrassed, or even guilty about asking for a helping hand. Make sure you’re comfortable with the idea of borrowing money from someone you know before you go through with it.
The dynamics of your relationship could change. Once you owe money to someone close to you, one or both of you could feel differently in the relationship. For example, they may start offering unsolicited financial advice or judge the way you spend money. Consider how your loved one would act after lending you money to decide if it’s a good idea.
How to Borrow Money From Friends and Family
If the benefits of borrowing money from a loved one outweigh the negatives, it’s important to have a plan in place before you borrow. You don’t want to enter into an agreement without laying some ground rules.
Get it in writing
Always put the repayment terms in writing. A written agreement keeps both parties accountable and sets clear expectations. Without a written agreement, you open yourself up to miscommunication.
Track your payment history
You could use a spreadsheet or a digital document with a record of the date you made a payment, how much you paid, and your remaining balance. Make it a shared document that both parties can view for extra transparency. A record is extremely helpful if the lender forgets about a payment you made or isn’t sure how much of a balance is left on the loan.
Offer to pay interest and late fees
To show that you are serious about this financial agreement, offer to pay interest and late fees if you miss a payment. This can show your loved one that you don’t want to take advantage of them and are committed to paying them back.
Consider taxes for loans of $10,000 or more
Loans of $10,000 or more could have tax consequences for the lender. The IRS generally expects lenders to charge interest, and the rate must be at least as much as the applicable federal rate (AFR). The IRS provides the AFR on its website. The lender needs to report the interest as income on their tax return.
If the loan is interest-free or has an interest rate below the AFR, the IRS considers the interest that wasn’t charged to be a gift from the lender to the borrower. The amount is deducted from the lender’s gift-giving limit for the year.
Talk to a tax attorney for any questions about tax planning with your specific loan arrangement. You could also just borrow $10,000 or less, as the IRS generally doesn’t concern itself with loans in that range.
Other Ways to Borrow Money
Other ways to get the money you need don’t always involve qualifying for a traditional bank loan. Here are three more methods.
1. Get a co-signer
Instead of asking to borrow money, you could ask a friend or family member to be your co-signer. A co-signer is someone who signs a loan or lease with the borrower and agrees to be responsible for payments if necessary. The presence of a co-signer means less risk for the lender.
For example, if you need help getting approved to rent an apartment or finance a car, a co-signer with a high credit score could help. Your loved one isn’t lending you any money, so there’s nothing to pay back, either.
2. Microlending
Through microlending, individuals or groups of individuals offer small amounts of money to people and small businesses without access to traditional banking services. While microlending is most common for small-business financing, there are also microloans available for individuals.
3. Crowdfunding
You can fund anything from covering medical treatments to paying off student loan debt through crowdfunding. Crowdfunding is particularly appealing because the funds are donated—which means you don’t have to pay anyone back. The key here is to address the purpose and benefit of donating in order to encourage people to donate and be truly transparent with your donors.
Find the Right Option for Your Situation
Sometimes, a loan from a person you know is exactly what you need to get your financial situation in order. Now you know more about the benefits and drawbacks, and how you can set up a loan agreement that protects both parties. You’re ready to take the next step toward a better financial future, whether that’s borrowing money from friends and family or trying one of the other options we covered.
Insights into debt relief demographics
We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during May 2025. The data provides insights about key characteristics of debt relief seekers.
Credit utilization and debt relief
How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In May 2025, people seeking debt relief had an average of 74% credit utilization.
Here are some interesting numbers:
Credit utilization bucket | Percent of debt relief seekers |
---|---|
Over utilized | 30% |
Very high | 32% |
High | 19% |
Medium | 10% |
Low | 9% |
The statistics refer to people who had a credit card balance greater than $0.
You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.
Home-secured debt – average debt by selected states
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) (using 2022 data) the average home-secured debt for those with a balance was $212,498. The percentage of families with mortgage debt was 42%.
In May 2025, 25% of the debt relief seekers had a mortgage. The average mortgage debt was $236504, and the average monthly payment was $1882.
Here is a quick look at the top five states by average mortgage balance.
State | % with a mortgage balance | Average mortgage balance | Average monthly payment | |
---|---|---|---|---|
California | 20 | $391,113 | $2,710 | |
District of Columbia | 17 | $339,911 | $2,330 | |
Utah | 31 | $316,936 | $2,094 | |
Nevada | 25 | $306,258 | $2,082 | |
Massachusetts | 28 | $297,524 | $2,290 |
The statistics are based on all debt relief seekers with a mortgage loan balance over $0.
Housing is an important part of a household's expenses. Remember to consider all your debts when looking for a way to get debt relief.
Support for a Brighter Future
No matter your age, FICO score, or debt level, seeking debt relief can provide the support you need. Take control of your financial future by taking the first step today.
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Author Information

Written by
Lyle Daly
Lyle is a financial writer for Freedom Debt Relief. He also covers investing research and analysis for The Motley Fool and has contributed to Evergreen Wealth and Monarch Money.

Reviewed by
Kimberly Rotter
Kimberly Rotter is a financial counselor and consumer credit expert who helps people with average or low incomes discover how to create wealth and opportunities. She’s a veteran writer and editor who has spent more than 30 years creating thousands of hours of educational content in every possible format.
Is it normal to borrow money from friends?
Yes, loans between friends are a usual, everyday occurrence. About 18% of Americans say they’ve borrowed money from either a friend or a family member.
How do you borrow money from friends or family?
Be upfront about how much money you need and how long it will take you to pay back the loan. Offer to pay interest and late fees if you miss a payment to show that you plan to take the loan seriously. Make a written loan agreement to avoid misunderstandings later, and keep a payment record online that you and the lender can both access.
Is there a cost to borrow money from friends and family?
A friend or family member may charge interest on a loan, just like a bank would. Borrowing money from loved ones is often cheaper than other types of loans, as they might offer you a loan with a low interest rate or no interest charges at all. But the cost depends on your loan agreement with them.