Redundancy tends to catch employees off guard, even though they have caught wind of the company’s plans to “move the furniture around”. There is nothing that could be done against the company’s decisions. Mass layoffs are a normal trend in corporations where the workplace environment is so dynamic that nobody knows what the future holds for them. Just one email, and their service contract with the company is terminated immediately.
Landing a new job with a high pay scale will not be a challenge, but what causes them alarm is the financial struggle they will go through between jobs. It is fortunate if you have some savings, but they cannot be enough to stretch across the whole duration of unemployment. What if some emergencies crop up? Borrowing is not a solution to meet unexpected expenses, as you do not have any supplemental income to prove your repayment capacity.
So, first off, you should apply for unemployment benefits. They will help you get by until you land a new job. However, you must meet the approval criteria. Despite receiving unemployment benefits, you might not be in a position to meet small emergency expenses. In this case, you can borrow money from either friends or direct lenders.
Now the question is whether it is safer to borrow money from friends or family than from direct lenders. The answer is in the affirmative.
How borrowing from friends and family is safer than borrowing from direct lenders
When you need money to meet emergency expenses, borrowing from friends and family will be the best choice. In fact, first you should turn to them in your hour of need. Borrowing from friends and family is better than borrowing from direct lenders for the following reasons:
Almost no or lower interest rates
One of the biggest benefits of borrowing money from friends and family is that they will charge no interest rates. If the loan amount is exiguous, they will never disrespect the bond that they have with you by charging interest rates. For instance, if you seek financial help from your parents, it is unlikely that they will expect interest payments.
Likewise, if you borrow money from your friends, they will be indisposed to charge interest rates. However, when you decide to pay back money after a long period of time, they might charge some interest. Fortunately, the interest they will charge will be lower than that from direct lenders.
Borrowing money at no or lower interest rates means that you do not have to bear the burden of heavy repayments. You can easily repay them. On-time repayment will not affect your relationship either.
Flexible repayment terms
Another benefit of borrowing money from your friends and family is that you can choose favourable repayment terms, so you do not struggle to pay back money. If you take out urgent loans for the unemployed in Ireland from a direct lender, you are supposed to discharge the whole debt in one fell swoop. Since these loans are small, usually not more than £500, the repayment term does not last more than 14 days. It would certainly be challenging to meet your obligation in such a short span.
However, while borrowing money from friends and family, you can ask for a longer repayment term. You can choose to pay down money in instalments. This will make it much more manageable for you to adhere to payments, and your friends’ trust in you will also remain steadfast.
Quick access to funds
When you are in need of money, you can simply inform your close friends and family of your financial situation. If it is not a large amount of money, they will immediately let you access funds. The good thing is that you do not have to get through a formal application procedure.
Borrowing from a direct lender not only requires you to put in a loan application form, but also results in losing some credit points as a result of a hard credit check. No lender would feel inclined to lend you money without running hard inquiries.
They appear on your credit report for two years and affect your credit rating. They can affect your borrowing capacity at lower interest rates down the line. All these problems are not faced while borrowing money from your friends.
There is no risk of getting into a loan trap
Borrowing money from friends is much safer than doing so from lenders because there is no risk of falling into a trap of an ongoing cycle of debt. There are various direct lenders on the market providing unemployed loans, but not all of them are legitimate. There could be loan sharks who charge exorbitant interest rates.
Since the whole amount is paid back in a lump sum within a short period of time, you might end up falling behind on the repayment. As a result, late payment fees and interest penalties will be charged. The cost of debt will keep accumulating if you keep rolling over the debt. Eventually, you will find yourself in an abyss of debt.
As a matter of fact, you will not be able to complain against a loan shark, as you decided to borrow money from them in the first place. You were supposed to have done research before borrowing money.
Even if you are borrowing money from a registered lender, you should compare interest rates and APRs to ensure that you choose the best deal.
You do not have to get into the hassle of research and bear the risk of being trapped in an exorbitant deal if you borrow money from your friends and family.
The final word
There is no doubt that borrowing from friends and family is safer than taking out an unemployed loan from a direct lender. This is because there is no risk of losing your credit points. You can choose flexible repayment terms that suit your current financial circumstances. Additionally, there is no risk of falling into a debt trap. However, you are still recommended to borrow money only when you are in urgent need of money.
