Borrowing and lending are two faces of a single financial channel. By lending money, one can earn extra on his investment. On the other hand, through borrowing money, a financially incapable person can easily arrange for the money. While the lender hopes for a good return in exchange for his investment, on the other hand, the borrower earns no extra benefits.
There are different types of money lenders. Some used to lend in exchange for valuable belongings, while others may like to lend without keeping any securities.
When one borrows money in exchange for securities, then it is called a secured loan. On the contrary, getting financial assistance without any guarantor or keeping belongings is known as an unsecured loan.
The friendly loan comes under this unsecured loan. If you are looking for such a loan to mitigate the financial crisis, then know about it altogether.
When a person asks for financial help from his family members, friends, or relatives without signing any agreement, it is called a friendly loan. As the borrower is a close friend or family member, the lender does not bother to prepare any agreement. On the basis of verbal agreement, generally, the person would like to lend money.
Even there are no such financial intermediaries between the borrower and lender. Instead, just like direct lenders, here, the moneylender used to lend money to his relative. According to the survey, it has observed that more than 50% of UK citizens would like to borrow a friendly loan within only in 2020.
However, this type of lending may increase the ratio of the risk factor for the moneylender. There are instances, where after borrowing money, the borrower is unable to repay the entire amount. As a result, the lender is unable to pressure the borrower due to sharing a personal relationship.
You may now have a fair idea of what is friendly loan all about? Actually, it is a type of informal loan. One can easily borrow money without any guarantor or any credit check.
The lender used to lend money out of trust. Even in most cases, the lender does not apply any extra interest rate on the lent amount. Some of these features include,
Perhaps nothing can be better than no credit check. Actually, when the lender is your relative or even a family member, he will know about your actual financial status. As a result, a borrower can quickly get financial help because of not having any credit checks.
Being a family member, the lender may not ask for any extra rate of interest over the borrowed amount. This is because the borrower needs not pay any additional amount of money. Only the repayment of the principal amount is required. However, on special benefits if you need a loan today, then you may also borrow from a direct lender. As sometimes, they also do not take a very high amount of interest.
When you apply for an unsecured personal loan to money lenders like banks or different financial institutions, they will go through a repayment history. It is a part of background verification. So, if they find any discrepancies during verification, especially in repayment history, they will not offer the loan. On the contrary, in a friendly loan, the lender will never do background verification.
Repayment is one of the most critical factors here. Although there is an intimate relationship between the borrower and lender, it hardly matters when it comes to the point of repayment. The lender always expects that his relative or friend will repay the money. Here the tenure may vary on the necessity of the lender. He can give 1 year or even 5 years for the complete repayment.
A friendly loan is a type of debt that has no formal process. Instead, it is quite an informal one. As a result, the process of borrowing varies from person to person. But majorly, these following types of friendly loans have been found out commonly.
Instead of keeping it entirely verbal, most of the lenders like to go for an agreement. In such cases, both the borrower and lenders would like to sign a legal paper where all the terms and conditions are mentioned. Moreover, everything is mentioned, including the amount borrowed, tenure of repayment, monthly installments amount, etc.
It brings safety to the moneylender as there is a risk factor of not getting back the lent amount. If the borrower signs that agreement, then he is legally bound to repay the loan.
Some friendly loan lenders like to offer financial help in exchange for any valuable belongings. It is not formal borrowing so that a lender can make changes at different times.
Moreover, suppose the moneylender thinks that the borrower is incapable of repaying the outstanding amount in such cases, of avoiding financial loss. In that case, the lender may ask the borrower of keep something as security.
It will bring security to the lender but increase the pressure on the borrower to repay the amount as soon as possible. In this way, by keeping valuable belongings, one can quickly get the security of his lent money.
The practice of promissory note is in the formal financial borrowing where two parties sign an agreement for repaying money on the given date. To get 100% assurance, generally, a lender may wish to sign a promissory note. While lending very bad credit loans with no guarantor from a direct lender, also use promissory notes.
Only after signing the promissory note, the lender can get the assurance to receive the entire borrowed amount. So, these are three basic friendly loan types. If you want to borrow a friendly loan, you must borrow either by keeping some valuable belongings or signing an agreement.