You are always better off if you can avoid borrowing money — especially from family and friends.But sometimes you really donít have much choice.
The good news is that if you use the right approach, you can actually enhance your relationship with your relations while getting the coinage you need.
If you find yourself in a debt pickle and need to approach your clan for some financial love, here’s how to do so:
1. Get Your Head Right
First, just because you need a loan doesnít mean you are a loser. Chances are good that many of the people you are about to approach were in your shoes at one time or another. Not only are they sympathetic and predisposed to help you out, they are also not going to judge you.
They know what it’s like to be in your situation. You aren’t the first person to ever hit up a friend for some dough and you won’t be the last. Keep your perspective.
2. Get Inside Your Potential Lender’s Head
People who make loans care about one thing — getting their money back as promised. Sure your kin wants to help you. But if we’re talking about anything more than ice-cream money — they want security for their stash.
When we formulate your approach (coming up) you have to keep this in mind. You have to be very clear about one idea. There are people who love you — but they love themselves even more.
They don’t really care about what you are going to do with the money. They just want their money back.
Get out a piece of paper and start making a list of candidates who might be willing to invest in you. At the top of the list, jot down the names of people who are most able to make the loan and who you believe have the willingness to do so.
Even if you are sure the person at the top of the list is going to write you a big fat check, keep adding names to your list.
At the end of the list write down “Social Lending Sites“. This will be your option of last resort. These are sites that put people who need money together with people who have money to invest. It will cost you a bit more than Uncle Harry would charge but it’s nice to know you have options if the family doesn’t pan out.
You want to have a large list of potential backers because you never really know what someone is going to do until they do it. And you don’t want to depend on any one person. If you have a long list of candidates youíll be able to approach each person with a more positive and encouraging attitude because you wonít come off as being desperate.
But if you only have one person to go to, you are going to be anxious when you meet. Of course they’ll sense your fear and it will turn them off. Once you’ve completed your list, make some notes about each person. Jot down anything you know about their investment history.
Do they take flyers or are they people who stuff their mattress because they don’t trust banks? Last, sort the list with those most willing to advance you the dough on top.
4. Final Prep
Remember I said earlier that your friends and family only care about how they are going to get their money back? You’re going to take advantage of that (not them) right now.
Before you speak to a single donor work out exactly how you’re going to pay them back (including interest) and when you’re going to do so. Write down where the money is going to come from. Make sure you can afford the payments and show them how.
The best way to do that is to show them your income and expenses. If you aren’t already tracking these numbers it’s a bit more work. Go back over your bank and credit card statement and figure out what these numbers are. Then continue to track your budget going forward.
This will solve two problems. First, your professional approach will impress your loved ones and let them know how seriously you take the matter. Second, you won’t need to figure out how to pay these people back later — you’ll already have worked it out.
Caution — do not approach a living soul with your request until you know how you’re going to pay back the loan. If you need to cut your spending to make those payments— show them where you’re going to cut. If it means taking on extra work, so be it. Whatever it takes, you must come up with a rock solid debt repayment plan before taking the next step.
You have your list of potential backers and your approach. Call the first person on the list and make your pitch. When you speak to these people do so without expectations. This is critical.
You don’t know what’s going on in the other person’s life. Don’t assume that a “no” means they donít care about you or trust you. Accept their answer graciously and with gratitude and move on if the answer isnít what you were hoping for.
If you are feeling a little unsure of yourself, call someone who is broke and ask them to role play with you. Go through your drill and then ask for feedback. What did they like about what you said? What didn’t they like? Ask for ways to improve.
Don’t be afraid to keep on practicing with other people until you feel confident enough to go live. Getting a loan from people close to you doesn’t have to be tortuous. If you have the right attitude and prepare well, this process can be financially rewarding and help you get closer to your loved ones too.
Have you ever received backing from family or friends? What worked best? What would you do differently today?
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