Should you borrow money from friends and family?

When you need money, the first thing that may come into your mind is to ask your friends or relatives. However, you must weigh carefully about whether you can manage to return it and can deal with what might follow if you cannot.

Pros and cons of loaning from family and friends

Asking your family may be the easiest way to borrow money. They can give emergency cash and help you dodge borrowing with extremely high-interest rates, such as doorstep lending, bank loans, and payday loans.

If both parties are confident it will not destroy a relationship with a family member if you cannot pay back, this is the best choice as it is usually free of interest.

If you are borrowing from a friend, be conscious that if you do not return the money, this could end your relationship with your friend.

Work out a budget ahead

If you want to ask a family member or a friend, make sure you have drafted up a budget to see how much cash you have left after clearing your living expenses.

Look at your current-account and credit-card records from the last three months, and think carefully how much you can borrow.

What if you cannot repay?

It can be stressful if you cannot manage repayments, but it can be even worse if you are leaving a someone out of budget as it might endanger your relationship.

That is why it is necessary to form out your budget and create a new payment plan as soon as you see yourself in distress.

The first thing you may need to do is to let them know what’s happening to show them that you are an honest person and that paying them is your primary concern.

Things consider before lending money to friends or family

If someone asks for financial help, especially if it is a family member or a friend, it can be difficult to decline.

However, there is no point going into hardship yourself because you want to help, or because you feel sorry for not helping. On the other hand, maybe you cannot afford to sacrifice your relationship with them just because of money.

Can you afford it?

Work out your budget before lending to anyone. Consider everything you lend as gone. Be sure that even if someone cannot repay you, you would still be able to pay all your living expenses comfortably without borrowing from anyone.

Can they afford it?

Encourage the would-be borrower to draft out their budget, just like what you would be doing. Remember that if they cannot repay you, this may cause financial trouble for yourself or worse, your relationship with them

What will you do if the borrower cannot pay?

You might be certain the person you have lent funds to will be capable of paying it back in full, but you must study what you will do if they cannot; this is a very personal decision, so take your time and think about this.

How formal should it be?

Always keep in mind that whatever you or the would-be borrower says can be denied. Get something in writing when you are lending to family members. Do not be embarrassed by this as this is very common.

Know that if you lend money to family and friends on a regular basis, you might need to be documented by the Financial Conduct Authority (FCA).

In case the borrower died with an outstanding debt, having a formal contract can protect you. Contracts can be used as a proof to claim from their estate.

What Is a Family Income Benefit Policy?

A family income benefit policy could be suitable for you if you want to give your family earnings to live off when you die, instead of a lump sum of money.

What is a family income benefit policy?

A family income benefit policy is a term life insurance policy that gives out an income, rather than a lump sum.

The said policies are not very common, so you may need to go through an independent financial adviser or broker to look for a policy that offers an income payout.

How does a family income benefit policy work?

You determine an annual benefit and a duration for the policy, also known as the term.

If in case you die during the term, your insurer will reimburse the income that you have chosen to your loved ones for the remaining duration of the term of the policy.

For example, if you took out a 20-year policy and died after 18 years, your insurer would pay out income for the remaining two years.

This is different to a lump sum payment on a life insurance policy, where you choose a larger amount as a one-off payout.

How much does it cost?

Your monthly premiums will depend on:

1. The annual income that you want as a payout: The greater the income you choose, the greater the payments in premiums each month.
2. Your age: The older you get, the more expensive it will be.
3. If you had health issues or have ever smoked: Anything that can have an effect on your health will shorten your life expectancy, and increase how much you pay for premiums for life insurance.

This type of policy usually has cheaper costs than level term life insurance since the amount an insurer pays out reduces throughout the term of the policy.

Is it worth it?

A family income benefit policy could meet your needs if you only wish to reinstate your income when you die. However, it will only pay out until the end of the term of the policy.

A family income benefit policy is a risky option if you are looking for a policy that pays out as much as possible

If you want a policy that pays out as often as possible, a family income benefit policy is an option that is risky.

This is because the insurer only compensates for the outstanding term of the policy, so the amount of money that your loved ones are going to receive will depend on when you die. But if you choose a term life insurance which grants a lump sum payout, you can receive it all if you die during the terms of the policy.


How to Avoid First-time Buyer Regrets

A staggering 10% of first-time buyers regret buying their first home, but you don’t have to make sacrifices that you will regret or exhaust your savings just to get your foot on the property ladder.

First-time regrets

We have discovered that first-time buyers are experiencing anxiety, stress, and depression because of the sacrifices that they are making in order to buy their first home.

Of the 750 new homeowners that have been surveyed:

· Over 25% moved far away from work

· 40% had to separate from their family

· 10% had to transfer to an area with greater flood risk

· 1 in 7 transferred to a higher crime area

Our home buying tips

Here are some fast and simple ways to save money buying your first house:

· Check how much you could be able to borrow before you start scouting properties. This way you will be able to know how much you can afford and what you need to save as a deposit.

· Look for government schemes which are designed to assist you so you can afford your first home. The Help to Buy scheme grants an interest-free loan for five years for new build properties.

· The higher your deposit, the better the deal you will receive and the more you will be able to afford. It might be worth it to hold on for as long as you can and save up before buying in an area that is not suitable for you.

· Look at obtaining a Help to Buy ISA since free cash from the government is too good to refuse.

· Do not just take a mortgage with your existing banks since you might not get the best deal. Shop around for your mortgage instead.