Loans from family and friends can be an excellent short-term finance option. Short term loans from friends and family will do away with the need to approach banks for borrowing purposes, and interest rates are usually likely to be lower or non existent. Family and friends are more likely to be flexible with repayment amounts and the lengths of the loans. However, setting out a formal agreement is a good idea for the protection of both parties. Formal agreements are also useful as a source of reference should any problems occur in the future regarding the loans.