If you are looking to obtain a loan you will find that there are many different types of loans that are available to you. You will find anything from signature loans to payday loans to help you finance items that you will need to purchase or pay off school debts or even to consolidate debts that you may have.
Loan Options
Looking for loans for bad credit and deciding what kind of loan to obtain can be a cumbersome and time consuming task. It can also be very confusing. You can get a signature loan that can be a secured or unsecured loan, a car loan, mortgage loans or even a debt consolidation loan. Of course there are many other types of loans that can be obtained. One of these loans can be a family loan.
Each type of loan will come with it’s own set of advantages and disadvantages. However there are more advantages than disadvantages when dealing with a loan from a family member.
Advantages
Many people are very tempted to take a loan from a family member for many reasons. When borrowing from a family member you will find that there is more than likely no security required or if there is the security is minimal. When paying back the loan there is either a very low interest rate or no interest at all. Of course you will also find that the repayment terms are going to be much more flexible. All of these details will lead you to head for this type of loan.
Disadvantages
There is one major disadvantage of obtaining a loan from a family member. This disadvantage will come into play if you default on the loan. When you are supposed to pay a family member back and you default on the loan your family relationship will be strained. Even though the loan is not through a traditional lender it should still be taken seriously. You really do not want to risk losing a good relationship with your family by not paying back a loan.
Documents
With any loan you need to get everything in writing. You should have documents that lay out the entire loan like a regular loan contract does but without the legal format. This document should explain all of the repayment terms. These terms should show how much the payment is, what day the payment will be due on and what day of the month it is due as well as the interest that will be paid if any. Also included in this document should be a description of what the money is being used for.
Many people will also decide to include in the document what if any resolution actions should be taken if any problems arise.
Conclusion
When giving a loan or receiving a loan it is always a good idea to have everything documented in case of a dispute on the loan. It will help to protect the borrower or the lender if the loan defaults or if you have any other issues when having the loan paid back. You can always meet with a loan expert to have them help in drawing the loan documents for you.