Saturday, March 10, 2012

Women's Money Week: Debt

If you've read personal finance blogs for any length of time, you know that debt is to be avoided. That seems to be what generally motivates people to start a blog in the first place - they want a public place to discuss their journey towards financial freedom, and nothing helps that like accountability. And it's fun as a reader to watch the monthly reports and see the counters tick down towards that final payment.

Even though we all generally agree that debt is to be avoided, there are some types of debt that seem okay to take on. Student loan debt frequently seems inevitable, as does a mortgage. If you have to choose between putting groceries on a credit card or making payments on a hospital bill, you know which lender is more likely to work with you on income-based repayment plans. Even the IRS is generally an understanding creditor, as long as you stay in touch with them and let them know about your financial situation.

In my mind, though, the most pernicious type of debt is that between friends and family. I don't particularly care what Bank of America thinks of me - I'm not afraid they won't like me if I miss a payment. And frankly, most people don't have very friendly thoughts towards their lenders. But what if the lender is your sibling or your parent? What if your adult child or your friend borrows money and then instead of paying you back, they make excuses or start ignoring your calls?

I'm watching someone close to me struggle somewhat to pay a debt to a former family member - she probably doesn't have to pay this money back, or at least not in a timely manner. There's no interest on it. But she feels very strongly that the relationship will never be the same until she pays it back, and it weighs on her more heavily than money she owes to a faceless corporation. I'm really proud of her for taking this attitude.

What do you think about loaning or borrowing money between family or friends?


  1. In my early twenties I borrowed money from parents, firstly to go towards buying a car so I didn't need to get a bank loan. I made fortnightly payments and owned my car outright within 6 months, now I really appreciate my parents help, also as I was responsible and paid them back 12 months later they lent me $1000 to pay off my credit card to avoid interest. Again I paid this off rapidly and now have my parents to thank for these interest free loans and a better credit rating. Therefore I am a believer in borrowing money from family, but I thnk the repayment plan needs to be clear at the time of borrowing. (I haven't borrowed any money from my parents the last 7 years and still own the same car.)

  2. My general feeling towards it is no. I've never had a bad experience but I read about so many people who did. I personally don't like the feeling I get when I think that someone won't pay me back so I generally try to avoid it. Either I give it to you and don't bother if you pay me back or not or I don't give it to you.

    If people have the same attitude that person that is close to you have. Then I see no problems with it. It comes down to a person's integrity and that is hard to measure.


Thanks for commenting!