Why a small loan is better than borrowing from a mate
We've all done it at least once.
Suddenly your strapped for cash, and your mate or family member agrees to helps you out, instead of you taking out a small cash loan.
Yes, sometimes borrowing the cash can all go to plan, but there is always a danger it could go wrong and cause irreversible havoc.
5 reasons why a small loan is better than borrowing from a mate
1. A small loan is a legal agreement in writing
Unfortunately, when you borrow cash from someone, you rarely put the terms in writing. Especially in Australia, a handshake is often the only agreement, and this means there's a lot of room for error or misinterpretation.
When you have a small loan contract however, you will always know the repayments, length of time you have and what costs are involved, and these can't suddenly be changed. You will also have the protection of a Financial Ombudsman, such as FOS, if you ever need to dispute anything. They are an independent dispute resolution service which will not cost you a cent to use.
If you have a dispute with the person you borrowed from, it will be very hard to resolve given it will be your word against theirs, and no paperwork or independent resolution service to refer to.
2. A small loan contract can't be forgotten
A very common occurrence is when one of the parties forgets about the agreement. Often it's the person borrowing, but equally it may be the person lending the cash, especially if it happens at the pub!
This is a hard situation to overcome, especially if both are convinced they are right.
Sometimes the person who has borrowed the money is certain they have repaid the loan, yet the person that lent the money has no recollection of receiving it.
Whichever the situation, this inevitably can end up in an argument, which can result with the relationship in complete tatters.
3. A small loan has a set repayment term
It's all well and good if the person lending the money is in a great financial position, but what if they suddenly hit financial stress themselves and need their money?
If they ask for the whole amount back urgently, you could be back in the same situation you started with!
A small loan contract is always taken over a set term, such as 6 months, so by taking out a small loan you can feel reassured that the lender would never contact you and demand the full payment. At Fair Go Finance we pride ourselves on being a responsible and trustworthy lender, and make sure our customers are very clear with what their repayments are, and when they are due.
4. A small loan can help rebuild your credit score
If you take out a small loan, and make all of your repayments on time, this can help improve your credit score.
If you currently have bad credit, this is a great step towards getting your credit rating back on track.
If you have a good credit, this will still benefit you, because with the recently implemented comprehensive credit reporting changes, your credit report will reflect your good repayment conduct.
For more information about comprehensive credit reporting, please watch our MD, Paul Walshe, explain it within our blog "Credit reporting changes and their impact on personal loans."
5. A small loan won't ruin a relationship
This was touched upon in points 1 & 2, but it is important to have it's own section.
Friendships and family member relationships are important to us all, and it is devastating when these are ruined due to an argument over borrowed money.
Taking our a small loan with a regulated online lender like ourselves, will help prevent this from ever happening as it will be a formal and legal agreement.
We hope the above 5 reasons have shown why taking out a small loan is better that borrowing from friends or family.
Now, if you are looking for a small loan, we're here to help!