A debt repayment plan is a must-have if you’re working on paying off multiple accounts. For most people, one of the simplest approaches is a debt snowball: you pay the minimum amount on all of your accounts, except the one with the highest interest rate. You throw as much money towards that one as possible, until it’s paid off. Then you move on to the next one. A debt snowball has the advantage of being the most cost effective approach, because it will save you money on interest.

But sometimes, paying off your debt with the highest interest rate isn’t your priority. If you’ve borrowed money from a friend or family member, it might be worth reordering your priorities.

More Than Interest Rates

If your family is anything like my family, loans are extended without interest — and usually without any sort of repayment schedule. Looking at the situation from a purely financial aspect, a personal loan winds up at the absolute bottom of your debt repayment schedule. It’s almost certainly carrying the lowest interest rate of any of your obligations, and if something happens and you are late with a payment or even default, your family isn’t likely to report you to a credit agency.

But family and friends don’t offer loans based on purely financial thinking. If your mom or dad offers you money, it’s because they want to help you out. They trust you to repay it — they expect you to do your best by them, just as they do their best by you. That means that you need to take more than just the money into account when figuring out your debt repayment plan. You have to consider the emotional aspects as well.

Making Family a Priority

In my mind, a loan from a friend or family member takes precedence over just about anything else. I want to minimize the amount of time that loan is out there, causing any sort of strain on my personal relationships. I try to make a point of laying out repayment terms when I’m talking about a possible loan from a family member in the first place, but even if I don’t have a minimum payment due, I set out to pay it off as soon as possible.

Sometimes, that means sitting down with your debt repayment plan and figuring out by hand just how much you can afford to pay towards the balance of that loan. Without a minimum payment to guide you, it can be tough to determine just how much you want to pay each month. You can simplify it by paying those minimum obligations on other debts first and then paying everything you have left over towards that personal loan.

Your Choice

If you don’t have a set agreement with that family member or friend who extended you a loan, you don’t really have an obligation to put repaying the loan as a high priority. If you choose to go that route, it’s worth at least figuring out just when your lender can expect repayment and passing that information along. Simply ignoring question — at least in most families — just seems like asking for problems.

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