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How To Borrow $ From Family And Friends

If A Friend Loans You Money Through A Bank Loan

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A borrowing may consist of your friend bringing you to a bank or lending institution and helping you make a transaction there through a guaranty or co-signature.

  • Guarantee: The bank loans you the money, with a set rate of interest and a repayment schedule. The loan is based on your friend's credit. Your friend guarantees that if you do not make a timely payment, your friend will -- including paying off the entire debt. Interest is likely to be higher than a loan as a co-signature.
  • Co-signature: The bank loans money to both you and your friend. Your friend agrees to let you keep all the cash. In return, it is your obligation to make the payments when due. If you don't, your friend has to make the payments. Interest is likely to be less than would be the case with a guarantee.

On the upside, a loan can help repair your credit rating. (See Credit.) On the other hand, even one late payment can hurt your friend's credit rating if the bank reports the late payment. (This is more likely to happen if the person co-signs a loan for you, instead of guaranteeing it.)

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