Bloodlines as Credit Lines

(Thanks to Soli for the title and insight.)

Here in the Philippines, it’s ordinary to seek out the help of close friends and family whenever we’re in financial need. There are even cases where mere acquaintances ask each other for monetary assistance. We’re generally matulungin (helpful) as a culture, and that’s not necessarily a bad thing. Let’s take a deeper look into the idea of using blood lines as credit lines.

Why it works to ask friends and family for financial aid:

It’s part of our culture. From the concept of bayanihan to proverbs about being a “good Samaritan”, at an early age we’re taught to be helpful.

It’s easy. All it takes is a phone call, a visit, or even a text message. “Pare, pautang naman, o!” These people are close to us, and most of them are willing to do anything to help us keep out of trouble. It beats filling up long forms and attending interviews when applying for a loan.

In some cases, it makes sense. If you’re a fresh graduate, starting a new career, and need to help support the rest of your family, it’s hard to find the extra funds to save up for retirement or an emergency fund. Also, for people who find themselves in financial emergencies and didn’t have the foresight to plan for them, they are left with no choice except to ask for help. After all, it’s much better than using a credit card with steep fees and interest rates.

Now let’s look at the other side of the story.

Why it is also dangerous to ask family and friends for financial assistance:

Apart from the money you borrow, there will also be utang na loob. And that is a much trickier transaction to measure. One never knows when utang na loob is ever repaid in full. If someone lends you money and later requests for non-monetary help, you feel obligated to give in – no matter how uncomfortable you may be with some of these requests. Hey, it might not even be your debt, it could be your parents’ – but it doesn’t stop you from feeling utang na loob.

Unsurprisingly, the idea of utang na loob, intended as a display of genuine gratitude, has become one of the foundations of corruption in this country.

Sometimes too much help can turn into hindrance. Someone I know, let’s call her Ms. A, was surrounded by friends and family who gave her financial assistance whenever she needed it. Her loved ones thought that they were helping her. However, the core of the problem wasn’t really a stroke of financial bad luck – Ms. A just had such poor money sense. She spent too much money on unnecessary things. Because everyone was always there to “help” her, she never got around to addressing this problem. The result? Mountains and mountains of unpaid debt – with more on the way. She’s become completely dependent on others and doesn’t even feel the need to look for a source of income via a job or business.

It puts a strain on the relationship. When money comes into the picture, a new aspect of your relationship surfaces. I’ve known of families that have had near or completely irreparable relationship strains because of money. Sisters don’t speak to each other for decades because of unpaid debt. A father disowns a son who doesn’t want to pull his own financial weight. People who were formerly friends start avoiding each other. For this reason alone, I don’t think it’s worth it to rely on friends and family for financial aid.

What is the solution?

Consider what you know about the other person. When borrowing from a relative or friend, or when lending money, think about the other person’s financial sense and what kind of strain this might put on your relationship. Is this person money smart but just ran into some unexpected bad luck? If you’re the one borrowing money, ask yourself if the lender trusts you enough to repay the loan.

Think about other options. Borrowing and lending may not be the only solution to financial problems. Are there items that you can sell? Is there a regular expense that the borrower spends needless amount of money on? Long lasting help doesn’t come in the form of cash, rather it comes in a finding a system that works. That saying about teaching a man how to fish – that one applies here.

Every situation is different, but these are just some things to keep in mind whenever you come across a financial problem where you may have to use your own network of friends or family as financial backup.

Have you ever borrowed money from a relative or friend? Have you ever lent anyone money? Feel free to share your experiences in the comments.