Covid-19: What to do if you can't repay loan to friends, family members

Many people take loans to satisfy some needs in their life. Some accept loans from one or more individuals, organizations, family and friends.

 

The current pandemic must have led many to seek loans from close friends and relatives, intending to return it in six months but the situation may suddenly be wrought with anxiety because you may have lost your job or irregular income.

However, you still need to repay the loan without denting your relationship with them.

 

The Economic Times revealed six ways one can handle the situation.

 

1. Don’t avoid the person

The worst thing you can do to harm your relationship, be it with a family member or friend, is to avoid them. Since you are bound to run into them some time or the other, any effort to circumvent the person or topic of repaying will not only make the situation awkward between the two, but will also land you in their bad books because they will assume you are not interested in repaying.

 

2. Express intent to repay

The best recourse for you is to confront the situation and have a straightforward conversation with your friend or sibling. Explain your difficult financial circumstances and reassure them that you intend to repay at the earliest. Do not be overly emotional or play the victim card; just state the facts and be honest about your intentions.

 

3. Set a new time frame, start small & pay interest

The best way to address the lender’s concerns may be to fix a new time frame fix a new time frame for repayment. If the loan is big and you were repaying in installments, cut the size of the installment to pay whatever you can till you find another job or your finances stabilise. Another way to regain their trust is to suggest paying an interest when you are able to restart the installments. It’s best to put the new time frame and interest amount in writing and share a copy with them to avoid any bad blood between you two.

4. Find other ways to help

If it is impossible for you to start repaying immediately, convey the same and then identify other ways in which you can help your friend or sibling. It could be something that requires physical assistance or presence. This is essentially a way of working on your relationship and maintaining contact so that the lender understands your intent.

 

5. Don’t spend on other things

During the time you are unable to repay the the loan, do not indulge in discretionary spending or lifestyle purchases that are seen as extravagant. If observed by the lender, it will be assumed, not without reason, that you are financially comfortable and only looking for an excuse not to pay back the loan. You will, of course, be unable to spend if you are genuinely in dire straits, but in any case, do not use the credit card and keep a low spending profile.

 

6. Avoid taking loans from family, friends

As a rule, do not take loans from family members or friends because it is the quickest way to ruin relationships. If at all you do, return the money at the earliest. Do not regard the transaction casually and treat it like a formal, business arrangement. If it’s a big loan, have a written agreement in the presence of witnesses and a copy of the pact shared by both the parties.