Cash payment © Getty Images
It can be unnerving when an unexpected event turns into a major expense, especially when you don't have the means to pay for it.
Beth and her husband were still in college when the engine blew in their 5-year-old car. Their dilemma: Pay $5,000 to repair the otherwise OK car with a remanufactured engine, or spend even more money to buy another car. Either way, they had no cash and no credit. And they had a paltry emergency fund.
Sometimes the easiest solution seems to be calling on family or friends for a loan. But proceed with caution. We interview borrowers from two families who requested anonymity. Their stories reveal when borrowing money works, when it doesn't and what you can do to make sure your loan goes smoothly.
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Beware of power shifts in the relationship

Friend to friend, parent to child, child to parent, brother to sister -- borrowing money from someone makes you beholden to that person.
"When you borrow money, it changes the power dynamic," says personal finance expert Manisha Thakor, CFA. "That's the overarching umbrella."
That's one reason Beth and her husband did not borrow more than once from her in-laws. "There were other family members who were habitual borrowers," she says. "My mother-in-law felt like she had the right to inspect their checkbooks."
She also made lifestyle judgments, Beth says. "My husband's brother was a frequent borrower. (My mother-in-law) felt she had the right to say, 'You need to quit smoking' or 'I'm not going to give you money unless you quit drinking soda.' You can use money to manipulate people, and I don't think that's right."

Be business-like in your dealings

Beth and her husband approached the car loan as a business deal. Before going to her father-in-law, the pair listed the pros and cons of buying a new car or fixing the car they had. They decided repairing their current car made the most financial sense.
They outlined their proposition to Beth's father-in-law and checked to make sure he agreed with their assessment. Then they asked him to lend them the money, which they'd pay back in monthly installments.
"We went to the Bank of Dad and said, 'We'd rather borrow the $5,000 from you,'" Beth recalls. "It was a no-interest loan. That was huge for him."