Would it be better to borrow money from an elderly relative than from a bank?

4 Answers 4


As most people said, family loans are dangerous to the relationship. The lender should not lend more than they are willing to forgive, and the borrower should not borrow more than they are very certain they can repay.

I would suggest a few things to consider:

  • The amount should be small enough that it will not impact their ability to pay bills within the life of the loan. (And be pessimistic about how long it will take to pay back for the purpose of this test.)
  • The amount should be small enough that you will be able to pay it off quickly; ie. this should be a very short-term loan.
  • You should pay them at least as much as they would otherwise make on the money.
  • Defaulting on the loan is not an option. Even if you go through bankruptcy and are legally allowed... this is family, and you gave your word.

Anecdote: I borrowed some money from my grandfather when I graduated from college to help with cash flow for an apartment, vehicle, etc. It was about 5% of my starting annual salary and I paid it back quickly and with interest.

  • This is the answer I've heard from the majority of people. The founder of a startup (in India) once told me it's the exact opposite when looking for funding for a small startup - borrow only from friends and family. Not sure if this is widespread in the startup world, or in Asia. Also, coming back to the question - i think it depends on what you are borrowing for - buying a new house or betting on horses...?
    – kabZX
    Commented May 8, 2016 at 9:20

I suppose it depends on the circumstances, but I wouldn't advise it. If you default on a loan to the bank it might ruin your credit, if you default to a family member it has the potential for much more damage in the form of fostering bad feelings and hurt the relationship.

  • 4
    Borrowing from family changes the dynamic of the relationship. Don't do it. Borrow from a bank, but only if you must.
    – Mike
    Commented May 25, 2010 at 2:04
  • "Before you borrow money from a friend, consider which you need more."
    – user296
    Commented Jul 23, 2010 at 16:51

If your intentions are honorable and you intend to pay it back in full and with interest, doesn't matter where you borrow the money from.

But as a rule, family/friends and money don't mix.


Apart from the reasons currently given (which have to do with personal relations), wouldn't a good reason to take the loan from the bank be to build up a credit history and/or improve your credit score?

  • note that "above" on this forum depends on the sort order. Note the tabs above the answers that allow you to sort by oldest, newest and votes Commented Jul 20, 2010 at 8:10
  • Oh..mine was set to "votes" for some reason. Thanks for the heads-up :)
    – Jedidja
    Commented Jul 20, 2010 at 9:56

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