EWS Money – Financial information and loan guides.

Should I Borrow from my Parents or the Bank?

by admin

If you need to borrow money then you will have a selection of options available to you. For some people it might be that they will be choosing between the bank and their parents. Not all of us have parents who would be able to help out with this sort of thing, but for those who do, they will need to decide which option will suit them the best.

Parents
Borrowing from parents can be easier and quicker as they will not need to do a credit check or confirm your identity so as soon as they have agreed to lend money to you should be able to get your hands on it. They may need to transfer it form an account or sell some investments but it should not take very long. They may even be able to let you have a bit to start with in order to keep you going until they are able to free up the rest.

Parents may not charge you interest or they may not charge you as much as a bank. They will obviously have an agreement with you about this. You might want to have something written down in order to make sure that you agree together on whether you pay this or not. They might hope to get the amount that they can receive on the money in a savings account which will be a lot less than you will pay to a lender for a loan. They may also be more flexible and let you miss repayments if you need to and may not charge you any extra if you do this.

There may be problems with borrowing from your parents though. If they suddenly need the money for themselves then they may come to you for it. If you cannot give it to them then you may feel guilty and they may feel resentment. It may be that you have siblings who may also want to borrow money and if there is not any money available to give them as you have it all then they may feel annoyed and jealous of you. It could cause all sorts of problems within the family.

Bank
You have no emotional attachment with a bank which can make it easier borrowing form them as there will be no jealousy or resentfulness. You will not be made to pay it back early, although you will need to stick to the agreed repayment plan or else you could end up with extra fees to pay.

The bank will probably be more expensive to borrow from. It may limit how much you can borrow as well, depending on your credit score. You might find that the interest rates go up as well and you end up paying more than you thought you were going to have to.

It can take time to arrange a loan with a bank and they will not lend to you if you have a poor credit score. They may not agree to lend you as much money as you want or it may be at a higher than advertised interest rate due to your credit rating.

How to decide
Although it might seem that there are more disadvantages with borrowing from a bank; particularly the cost it is worth weighting those advantages and disadvantages. It may not be worth falling out with your parents just to save some money on a loan. Of course, you may not be able to borrow money any other way and then you may have to decide between borrowing from your parents or not borrowing at all. Unless you went for a poor or even no credit check option. It is wise to always think about whether you really need the money that you are borrowing. You need to decide whether what you want is an emergency purchase or something that will make a big improvement in your life in the future. If it does not fit these criteria then borrowing is probably not the right decision anyway and you will be better off saving up and then buying the items once you have saved up enough. This can feel hard, but if you save up each month, the amount of money that you would otherwise have used to repay the loan, then you should be able to do it. If you do decide to borrow then make sure that you have repayment terms, whether that is with your parents or the bank that you can manage. It is so important to make sure that you are able to pay all of your bills and cover your costs on top of the loan repayments. If you cannot do this then you need to look at whether you can cut down your spending anywhere or find some ways to earn more money so that you can manage them.

Business Loans

Should I use a Business Loan to Expand my…

by admin

If you have a business then you are probably always looking at possible ways that you can expand. It might be as simple as wanting to afford more stock to sell or to employ more staff or to expand your premises or buy more manufacturing equipment. The costs will vary depending on what you do in your business and how much you want to expand. There are various options for funding an expansion and it is worth taking a look to see whether a business loan will be the best option.

Grants and crowd funding
Some businesses choose to make money from applying for grants or getting crowd funding online. Although these can be useful ways to make extra money it can be difficult. You may need to have a very specific purposes to make money through grants and for crowd funding you need to be able to give people a good reason to donate money to your company and you need to give them something in exchange for their donation if you are successful in raising the full amount.

Savings
If the business has savings then these can be used to pay for the expansion. Many businesses do not have savings, but it can be a wise thing to accumulate. Rather than keep using profits to pay back into the business, some should be saved so that they can be used for larger purchases such as expansions. It might be wise to start saving form now on so that you can accumulate the money that you need rather than getting a loan. Although this will delay the expansion it will mean that you will not have to worry about the costs of the loan. Of course, it may be vital that you expand at this specific point in time so whether you can put things off will depend on your specific circumstances.

Personal Loan
It can be tempting to think that it might be best to get a personal loan. This could be a cheaper or easier option than getting a business loan. The problem with using a personal loan is that it will not be associated with the business but with you personally. This will have an impact on your credit rating and will mean that if the business goes bankrupt you will still have to repay the loan as usual rather than being able to use the sale of the business assets to help towards repaying it. It could affect your chances of borrowing other money such as a mortgage. If you personally have a poor credit record you may not be able to get a loan or you may only be able to get an expensive one.

Business Loan
So a business loan could be the right thing to do if you do not have savings or the time to save up money and cannot set up a crowd funding account or apply for a grant. You will have to put together a business plan in order to apply for the loan which will enable you to look at your figures and calculate whether your business will be able to make the repayments for the loan. Affording the repayments is really important as if you cannot then you will get the business into debt. You need to be confident that not only will you be able to initially afford them but for the whole term of the loan so that you can ensure that it gets paid off. It is a big risk to take and you could be risking the future of your business so you need to be really sure that it will work out for you. Make sure that you are confident in the figures that you are forecasting and that you are looking on the more pessimistic side of things to be sure that you can cope even if things do not go as well as planned. It is worth also coming up with a back up plan of what you might do if you cannot cover the repayments so that you can use this if necessary. Hopefully it will be worthwhile and it is good to look on the positive side, but when you are planning you do need to make sure that you are realistic just in case and look at worst case scenarios. Imagine what you might do if money doesn’t come in or if payments come in late. Think about whether there are places that you can cut back, that perhaps you could start cutting back on right away so that you can have some money available to you in case you do not make enough in the month to cover the repayment.

Do make sure that you compare the different loans available and pick one that not only offers good value for money but has repayment amounts that you will be able to afford.

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﻿Should I Borrow from my Parents or the Bank?

Should I use a Business Loan to Expand my…

Should I Borrow from my Parents or the Bank?