Have you ever been in a position where cash is so tight that you need a loan to keep yourself afloat? You will probably be in such a place one day even if you have not been there already. When you do get there, you may be strongly tempted to borrow money from a relative because you think your family will offer generous loan terms. However, you should think twice before asking a relative for a loan. In fact, there are ten major pitfalls when it comes to getting a loan from a relative.

1. Sibling Rivalry — Think again if you believe that you have outgrown sibling rivalry. If you borrow money from your parents, you may provoke strong feelings of jealousy from your siblings, especially if they have never borrowed money from mom and dad. Bankrate.com warns those who want to borrow money from their parents that siblings often believe their parents are playing favorites when their parents lend money to their brothers and sisters.
2. Hidden Strings — Relatives may say there are “no strings attached” when they lend you money, but such is rarely the case. The lender may expect you to be at his or her beck and call as long as you owe money to him or her. You will at least feel like you cannot turn down a request for help from the relative to whom you owe money.
3. Misunderstandings May Abound — When borrowing money from a relative, the line between a gift and a loan can be easily blurred. You may think of it more as a gift even if an agreement is drawn up. This may make you less inclined to repay it. Your relative may not demand a formal loan agreement. This will increase misunderstandings and even cause your lender to resent you if he or she sees you at family gatherings and you still owe money.
4. Added Pressures — Business Week notes that small business owners who borrow money from relatives face many extra pressures in addition to the demands of starting a business. If you have never run your own business before, do not borrow money from relatives for your company unless you have exhausted all other lending options.
5. Awkwardness — Family gatherings can be awkward enough, but the discomfort you feel around oddball relatives will increase if you have turned to them for a loan.
6. Loss of Relationship — Despite good intentions, you may find yourself unable to pay off a loan. If you have borrowed money from a bank or other creditor, filing for bankruptcy can help you if you are completely unable to repay your loan. But if you borrow from a relative, you might lose the relationship forever if you cannot give the money back to your lender. At the very least, this possibility must be discussed when you ask for a loan. That way, you can take steps to avoid it.
7. Loss of Reputation — Those who borrow money from their in-laws risk losing whatever esteem they might have in the eyes of these relatives. You are probably not good enough to be the spouse of their child anyway, and asking them for money will only confirm their suspicions. You may also find out the real meaning of the term monster-in-law if you borrow money from one or both of your spouse’s parents.
8. Business Interference — The small business advice section of Chron.com notes that many family members who lend money to relatives for a small business will feel like stakeholders and try to interfere with the company’s operations. That can prove disastrous.
9. Gossip — You might think borrowing money from a relative is a private affair. Unless your relative is exceptionally good at keeping a secret, however, the whole family will probably find out about your loan even if you do not want that to happen.
10. Financial Hardship for the Lender — Relatives are unlikely to turn down your loan request even if they lack the money to fulfill it. Therefore, you may inadvertently cause relatives financial hardship if you borrow money from them.

Borrowing money from a family member will bring out his or her true colors, which may be ugly.

Any time you borrow money, whether from a bank, a friend or family member, or a credit card, in effect you are borrowing from your future. You will have to pay the money back, in most cases with interest, so you should be sure you’re taking out the loan for the right reasons. You should never borrow money to buy things you can’t afford, and always make sure you can keep up with the payments you’re agreeing to when taking out personal loans.

1. Debt consolidation – Personal loans can help you consolidate high interest credit card debt into a lower interest, fixed rate loans with manageable monthly payments that can help you get out of credit card debt faster.
2. Buying a car – Interest rates for auto loans are usually lower than those for personal loans, so if you can get a car loan to buy the car of your dreams, go for it. Most banks won’t offer auto loans on older cars with lower resale value, however, since the collateral isn’t worth much. In that case, a personal loan is the way to go.
3. Car repairs – If you have an accident, auto insurance often doesn’t cover all the repairs. You can take out a personal loan to get your ride back on the street fast.
4. Medical expenses – When you have a serious illness or injury that requires hospitalization or emergency medical aid, the bills often come in faster than you can keep up. Always verify what portion insurance will pay first, but if you don’t have enough in savings to pay the rest, you can often use personal loans to pay your balance. Not only will it keep bill collectors off your back, but it will help your credit score.
5. Family vacations – While you don’t want to mortgage your future on frivolous trips, taking a family vacation can often bring families together and must be timed when school is out. If you’re careful, you can use personal loans to take that trip with your family. The memories will last a lifetime, and the loan can be paid off in a matter of months.

Personal loans are one of the few forms of unsecured credit available to consumers. Since there’s no collateral, interest rates will be higher than for secured loans, such as mortgages and auto loans. Personal loans also come with fixed repayment terms, including interest rates and loan length. To get the best terms on personal loans, be sure to comparison shop.

When you’re looking around for the best deal on personal loans, there are several things you should be aware of. Most people apply only at one bank or financial institution, and sign up for the first deal they are offered. Of course you can take a few moments to consider if you think you’re getting a good deal, but how do you really know? Be sure you know what to look for in a personal loan.

Comparison Shop

If you were out shopping for a new pair of shoes, or trying to decide which car to buy, you would compare benefits, features, and price across several models. Why should shopping for personal loans be any different?

Using an online marketplace, you can find out what kind of deal you could make with several lenders. You can also visit specific lenders online to compare rates and terms. Then, if you choose, go down to your local bank or credit union and ask them if they can do better. That way, when you sign your loan papers, you’ll know you got the best deal.

Loan Rates and Terms

For most people, comparing features on new cars or features on a new appliance can be fairly easy. You know what you’re looking for, and the benefits of each item are clearly identifiable. Researching the best terms on personal loans is a bit trickier, but it’s much easier if you understand the game.

We’ve listed these in order of importance, but your situation may change that order. Make sure you get the loan that’s right for your situation, and move your priorities up and down according to your needs.

1. Get a low interest rate – the lowest you qualify for. The lower your interest rate, the less you’ll pay overall for borrowing the money.
2. Negotiate for affordable payments. Don’t commit to pay back money on a timetable that just won’t work. If the payments are too high, see if you can lengthen the loan period. You can always make higher payments to get the loan paid off sooner if you can afford it, as long as there’s no penalty.
3. Avoid balloon payments. These tricky little buggers can catch up with you later. Unless you’re expecting a large sum of money to fall into your lap, don’t agree to a balloon payment. If you’re unsure whether your loan has one, ask your lender or loan officer.

Shopping for personal loans online can be tricky. It’s much easier if you know what you’re looking for, and what to avoid. If you’re an old pro and have gotten many consumer and personal loans before, you’re probably aware of some of these tricks. If you’re new to credit, however, there are some things you should be on the lookout for:

Repayment Terms

• Lengthy loan term – usually spelled out in months, this is the time it will take you to repay the loan. Avoid lengthy terms since your interest will accumulate over a longer period, and you will pay more if the loan term is too long.
• High interest rate – could be variable or fixed. Make sure you know how high the interest rate (APR) could go if you make late payments or if the index rate changes. Avoid variable rate loans when the market is set to rise.
• Fees – are there penalty fees for things like late payments, missed payments, returned checks? What about fees for calling customer service or making a payment over the phone? Does the lender charge fees for using your credit card to make payments over the phone or on their website? If this information isn’t clearly spelled out, you can and should ask before you sign.
• Prepayment penalty – is there a penalty fee if you repay the loan early? Many lenders charge this fee to offset the interest they lose when borrowers repay the loan before it’s due. Look for prepayment penalties when applying for loans and avoid them if you can.

Credit Traps

• Balloon payments – If there’s a balloon payment due at the end of your loan, you should be very wary. Balloon payments often cause customers to default on personal loans, since they aren’t able to come up with large sums of cash. If you default, you will end up owing more interest, fees, collection costs, possibly even attorney’s fees, so avoid this trap if you can.
• Payday loans – many lenders offer both personal loans and payday loans, but payday loans usually have a much higher interest rate and there’s only one payment – a balloon payment usually due within two weeks. If you’re looking for a personal loan you can pay back over the course of a few months or a year, you won’t get this with a payday loan.

Many people get so excited to learn that they could qualify for a personal loan, they don’t stop to ask many questions. Be careful when signing up for any offer of credit, however, since you will be stuck with the deal you sign for some time. Make sure you understand the repayment terms, fees, and penalties, and always avoid credit traps.

Personal loans can be a good source of funding for a variety of legitimate reasons, but there are also a lot of scam artists out there. It’s important to be prudent with your personal information, and inform yourself about common tricks and outright scams that are designed to part you from your money without providing any service. Follow these steps to protect yourself.

• Don’t respond to e-mail messages asking for your personal information online. Phishing scams often try to get victims to enter their bank account or credit card information, pin numbers, and passwords by tricking them into thinking they’ve already been hacked. Other rip-offs make people think it’s their bank that’s contacting them. Sending any private information through e-mail is ill-advised. Always contact your bank directly if you’re unsure whether the e-mail is legitimate.
• If you are contacted by a finance company or other lender with a pre-approved offer of credit, be wary. Many disreputable lenders take advantage of low-income and elderly people by sending out offers of credit. They pack their loans with hidden fees and unfavorable terms, knowing the customers won’t read the fine print. The best rule of thumb is to avoid doing business with lenders that seek you out.
• You should know the loan repayment terms up front, and not just rely on the word of your loan officer. If she’s telling you something different than what’s in black and white, run very fast in the other direction. No reputable lender would try to pull the wool over your eyes like this.
• If you’ve been scammed once, maybe it will work again. At least that’s what the scammers are thinking. If you’ve been a victim of credit fraud or a phishing scam, be wary of callers who may try to convince you that you still owe money. These tactics often work on the elderly and people who aren’t familiar with credit, how to use it, and the laws that protect consumers. Don’t give them any information, and report any activity you suspect is fraudulent.

Whenever you’re signing up for personal loans, you need to protect your personal information. Don’t give out too much information until you know who you’re dealing with, and always look out for your credit. Getting into a bad deal on a personal loan now could have long-lasting consequences. Be sure you know what you’re getting into, and who you’re getting into it with.

Job losses and the current economy have wreaked havoc on people’s finances. Some people may choose to turn to their family or friends to borrow money. If you are the one they are turning to you need to think twice before giving them money. This can cause a strain on your relationship if they fail to pay you back. Consider your options and theirs before agreeing to loan anyone money. Your relationship is worth more than a few dollars. Read through these stories of the reasons you should reconsider loaning money to close friends.

1. Five Reasons Not to Lend Money: One blogger shares the five reasons you should not lend money to close friends or family.
2. Never Loan Money to Friends or Family: Find out why you shouldn’t loan money to your friends or family and the problems this can cause.
3. When Someone Wants to Borrow Money: This blogger shares with you some tips on how to handle the situation when someone asks to borrow money from you.
4. Should You Loan to Family?: See what one blogger shares and thinks about loaning money to family or friends. Find out why it may not be such a good idea.
5. Family Loans and Cosigning: When a family member is needing a cosigner on a loan, find out whether it is really a good idea if you are the extra party to the loan.
6. Borrowing From Family and Friends: If you are in the position of needing money, look here before you ask your family. There are some things you need to take into consideration before getting into that sort of agreement with your family or friends.
7. Lending to Family and Friends: This is a very delicate situation. Some families have been torn apart by lending money out. Take time to read this and see whether it is really a good idea or not.
8. Do Not Mix Business and Family: Get a few tips on why mixing your business money and family is not a good idea. Relationships have been severed when doing so.
9. Dealing with Family that Constantly Asks for Money: Learn a few ways to handle those family members who may be constantly asking you for money. Get ideas on how to tell them no without hurting the relationship.
10. Dealing with Money Requests: Discover how to deal with someone in your family asking for money. Find an easier way to handle the requests and still keep your relationship in tact.
11. Should You Lend Money to Friends?: See what one blogger says about lending money to your friends. Find out why they say the answer should always be No.
12. Thoughts on Lending Money: One blogger shares their thoughts on lending money to friends and family. Find out how they feel and the reasons they may refrain from doing so.
13. 7 Ways to Help Your Family: When others are in a tight money bind, you could lend them money. Often this leads to strained or even severed relationships. Find seven ways here to help them without hurting your relationships.
14. Lending Your Significant Other Money: Should you lend your boyfriend/girlfriend money? Find out here what one blogger says about this delicate subject.
15. Should I Lend Money?: See how one blogger feels about lending money to your family. Some say there is not a problem while others advise against it.
16. When is Lending Money Okay?: Learn when it is okay to lend money to family and friends. Some people say it is never okay while some do it everyday.
17. Don’t Loan Money to Friends or Family: One blogger shares why you should never loan money to those close to you. This can put strains on your friendships or severe your relationship entirely.
18. Cosigning a Loan: If you are considering cosigning a loan with a family member or a friend read this first. Find out here what you need to know before signing those papers.
19. Bad Idea: Find out why some advisers say that borrowing money from friends is a bad idea. You should not lend money to friends or family in most cases.
20. Do You Loan Friends/Family Money?: One blogger says she never does. See why she doesn’t and why she suggests you should steer clear too.
21. Your Take: Take a look at what one blogger says about lending money to their friends. This blogger does not have a problem with it but many do.
22. Why We Say No: Learn why some say no to cosigning or loaning. It is ultimately your decision but you need to take all factors into consideration.
23. When You Should Say No: There are times it is okay to say no and you need to know when. Sometimes no is the best answer you can give someone.
24. Lending to Family: Uncover what some say about lending money to your family members. Some opinions lean towards never lending money to friends or family.
25. Blogger’s Thoughts: These blogger ladies share their thoughts on lending money to friends or family. If you are thinking about doing that then stop by here first.
26. Tough Situation: Trying to decide whether to loan money to friends and family is a hard decision. Do not let your heart overrule your brain. Be smart about your decision.
27. Losing a Relationship: Most people have ended up with losing friends or family members because of loaning money. Learn how you can get through lending or not lending money without losing relationships.
28. Tough Love: Some are not sure if it is ever a good time to lend money to friends. Find out here what one blogger says about this situation.
29. How to Lend Money: If you still want to lend money to friends or family, try this site to help you learn how. These tips can help you prevent the relationship being lost over money.
30. Lending Money: Deciding whether to lend money or not is a tough decision. Here are a few tips on helping you make the best choices.
31. Lending Money to In-Laws: Learn whether it is a good idea to lend money to your in-laws. Sometimes this can lead to more problems than just the money.
32. How to Loan Money: If you are still wanting to loan money then you should read here. This will give you tips on how you can loan your friends or family money and still salvage the relationship.
33. Would You Lend Money to Your Friend?: See the many different opinions on whether or not lending to a friend is okay. Some people say sure while others say no way.
34. Give a Gift: One blogger shares the idea of giving a gift instead of just loaning money to your friends or family.
35. Deciding to Lend: One blogger shares their struggle on whether or not to lend money to their friend. Find out what they decided.
36. How to Lend the Smart Way: Sometimes you will just decide to lend money no matter the situation. Learn here how to lend and do it wisely.
37. Relatives or Friends: You can be in a sticky situation. Deciding whether or not you should lend money is not easy. Here are a few tips on making that decision.
38. Lending Money: If you decide to go ahead and lend money there are a few things you should know. One thing you may want to do is draw up a loan agreement.
39. Lending the Christian Way: Some take a religious view on lending money. Find out how they look at it and ways to do it wisely.
40. How Can You Help A Family Member: Sometimes the best way is to help the family some other way than giving them money. Get ideas here how to help your family member who may be in trouble financially.
41. Wise Lending: Should you decide to loan money, here are a few tips to help you do that the smart way. Do not lend out money till you have looked at these tips. This can save you some heartache down the line.

Image Credits: La Chiquita

The military make perfect targets (I mean, customers) for personal loans. They are employed. They have steady income. They have economic needs that crop up from time to time. So far, they’re not much different than most of us (well, other than the employed part).

The one thing that a soldier has that most of us don’t have is a First Sergeant (that’s a Senior Chief Petty Officer, for you boat floaters). He’s the guy (from a banker’s standpoint) that you call first if a soldier isn’t making his loan payments in a timely manner. He’s also the guy (from a soldier’s standpoint) who can make your world a living hell if his morning coffee is interrupted by a banker who’s waiting for his money.

First Sergeants (or SCPOs) are invariably ugly people. When they hand them the rank insignia, they immediately take away all congeniality they may have otherwise had. And if you’ve ever had to stand in front of one and explain yourself and your financial affairs, you know that they get even uglier when they’re riled.

That’s why bankers and other lenders in military towns are so eager to lend money to soldiers. They know they have the meanest, ugliest ally in the world. And, furthermore, with a standard fort, post, or base directory and the soldier’s unit, the heavy artillery is never more than a phone call away. We’re not sure, but we’re pretty convinced that all of the First Sergeants’ coffee times are printed somewhere in the post directory as well, so bankers can properly time their phone calls.

Your best bet when you’re in the military is to avoid taking loans that you don’t need. And when you do need a loan, drive at least 150 miles from your post. The further you get from military bases, the less likely your lender is to realize that he can call your first sergeant if you’re a week late with a payment.

Another good idea, if you have to take a loan (especially if you do it near a military base) is to set yourself up on automatic payments. A quick trip to the paymaster and you don’t need to worry about getting your loan payment in on time while you’re out in the field. Best of all, you won’t have to see the First Sergeant after his coffee break has been interrupted.

Photo via The U.S. Army

So, how do I build good credit?

That largely depends on where you’re coming from. The first thing to do is to know where your credit is right now. You can check this from any number of free Internet sites which allow you to check your credit scores with the three major credit ratings bureaus: Equifax, Experian, and Trans Union.

If your credit is good, you’re doing something right. Still, you’ll want to make sure your entire report is correct. Even seemingly small transgressions like a late payment here or there can hurt you in the long run, and you’ll want to make sure that anything negative on the report at all is accurate.

If your credit is not so good, you have some work to do. Fortunately, credit scores can start to rise fairly rapidly if you just start paying off old debts. Look your credit report over, and make at least some payment on every bill you owe, while trying to pay them off one at a time. Even if you are unable to make full payments, show that you are trying to pay your bills off. Your show of good faith will improve your credit score (or at least mitigate how much it is hurt).

If you haven’t established any credit one way or another yet, you have a clean slate. Unfortunately, it can be tough to get personal loans or any other kind of credit if you have no credit history. Many banks will lend to those with poor credit before they’ll lend to those with no credit. One of the best things you can do for yourself is to take out a small loan. You’ll probably need to present something as collateral, so be prepared for this. Once you have the loan, make the payments on time. Better yet, make the payments early.

Don’t pay off the loan too soon, though. Believe it or not, if you make a habit of paying off money you borrow from a bank too quickly, they are hesitant to loan again. Banks make much of their profits from the interest on loans, and someone who pays all of their loans off way ahead of schedule means the bank isn’t making much on the loan. And that can make them hesitate to loan more money.

Slow and steady is the rule. Don’t borrow a lot of money you don’t need, but borrow a little here and there, and pay it off one month at a time.

Photo via ideacreamanuelaPps

Don’t get us wrong. This isn’t a crusade against the lending industry. Loans, kept in proper perspective are a necessary part of living in today’s world. The problem comes when we take out loans that we can’t pay for. Lending companies will actually try to prevent you from doing this. The problem is, they have matrixes that are based on what they perceive average expenses to be, and no couple really fits into the exact molding of an “average couple.”

A budget is the best protection your marriage has from financial problems. In most cases, they are simple to make. Figure out how much income you have. Figure out an amount to give to savings (typically 10%) and how much you want to give to charity or your church of choice (believe it or not, studies have shown that those who regularly give charitably do better financially than those who don’t).

Next, figure out how much you can afford for housing. This should be no more than 25% of your income and should include your mortgage or rent, utilities, and related housing expenses. Then figure out how much you have to spend for transportation. Experts argue about what percentage you should dedicate to this and the rest of your expenses.

Truthfully, it doesn’t matter what percentage of your budget goes to each item, as long as you are agreed on a percentage, and at the end of the day your budget doesn’t equal more than 100% of your income. The next part is the hard part: sticking to your budget.

Sticking to a budget may mean saying no to the “better” car you were hoping to buy, or saving for some things instead of using personal loans to get them. In any case, it’s better to have a used car and a happy marriage than a brand new car that gets fought over in the divorce settlement.

Photo via gui.tavares

The items that cause our other halves such consternation, such unbridled rage tend to be the objects of our greatest affection: items related to our hobbies, our toys. And, guys, this is ground that must be defended, regardless of how crazy our wives get.

We have an adult friend (and by adult, we don’t mean 19 years old, but closer to 40) who actually spent $75 on (get this) a large plastic Dungeons and Dragons figurine of some kind of a devil. Now that’s being loyal to your hobby, folks. We’re not sure if his wife wanted to kill him more for buying it, or for displaying it prominently where company would see it. At least he didn’t need to take out personal loans to buy it, though.

Here are the top 4 things men we know have bought with personal loans that drove their wives to the brink of murder:

• A Red Pontiac Firebird sports car. This might not have been so bad except that it didn’t run, the guy had absolutely no mechanical ability, and he actually needed a car. Granted, it was only $900, a minor detail that did not seem to quell her wrath.

• Golf clubs. OK, again, not such an unusual purchase, except the guy didn’t play golf. And didn’t end up starting like he said he was going to. Maybe it was because his wife scared him out of it.

• A beer bash. Don’t get me wrong, I doubt the guy wrote that down as what he wanted the loan for. In any case, the bash lasted four hours, the loan took four months to pay off, and four years later, he’s still hearing about it.

• Jewelry. This guy might have gotten away with it, if he had given her the jewelry for Christmas. She might have even been driven the other kind of crazy (remember, the “I’m gonna get some kind”). The fact that she found the loan paperwork and didn’t end up getting anything shiny under the tree? Let’s just leave at this: it wasn’t pretty.

So, if you’re thinking about buying something that you know might drive your wife crazy, wait until you can pay cash. After all, no one wants to see your wife on America’s Most Wanted.