The Hazards of Personal Loans

money down the drain

When most people think of the word debt, they immediately think of credit cards, auto loans, student loans and mortgages. Those seem to be the most common debts in our society today. But there is another kind of debt that doesn’t get as much attention as the previously mentioned, and that is personal loan debt. This occurs when you borrow money from a friend or family member for whatever reason and vow to pay it back to them at a certain time.

Taking out a personal loan

“Personal loan” is really a technical term. Most people would simply call it “borrowing” and it is usually done with a close friend or family member. A prime example would be a friend or fam

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2 Responses to The Hazards of Personal Loans

  1. Karen says:

    When I was a graduate student, I had a tuition waiver that was suddenly cancelled one semester before I was due to graduate. My graduate advisor “forgot” to tell me until after the deadline for applying for student loans had passed. I had to come up with the tuition within a couple of weeks, or be dropped from the research program.

    I never thought I’d borrow from my family, but I ended up going to one of my aunts for help. (My parents were no longer living then.) She asked me to come up with a budget, and sign a loan agreement (although the terms were pretty loose!). Happily, I graduated a few months later, got a job and paid her back within a year.

    I’m really grateful that she agreed to help, even though it was probably a risky investment for her!

  2. Dehoyos4 says:

    I wrote on this same issue in the personal finance forums. My husband and I did not write out an agreement and we are having to take a loss. We let my brother in-law borrow over $2000 and he has no intentions on paying it back. He has burned a bridge with us. We trusted him but obviously he has no respect and not enough self control over his finances.

    I do everything I can in my family to insure we save enough money every month for a rainy day. I clip coupons ,look for sales, conserve my utilities, ect. It took me a lot of time to save those $2000 and I feel like all that hard work went down the drain. While them on the other hand are what I call “extreme consumers”. Buying everything they want and not necessarily what they need.

    So be careful when lending money and pay close attention to the person’s financial habits.

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