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Carla McLoughlin regularly borrows small sums from her family to cover expenses while waiting for her next paycheck. This reliance on loved ones for financial support is a common trend, as a recent survey of over 4,000 adults revealed that 26% had borrowed from family and 15% from friends this year, compared to 25% who had taken out Buy Now Pay Later loans. Many individuals opt for borrowing from friends and family after being rejected by traditional financial institutions like banks, although some loans from loved ones may still come with interest.
Val Lucus, Carla’s mother, shared her experience of lending money to family members and facing challenges when they didn’t repay her. She mentioned the difficulties of constantly following up with borrowers to retrieve the lent amount. Despite these challenges, Carla and Val maintain a reciprocal borrowing arrangement, with both occasionally lending to each other when in need. Val emphasized the importance of assisting each other in times of financial strain, highlighting the example of pawning her grandmother’s rings to cover expenses.
Younger adults, households with children, and individuals on zero-hours contracts or lower-paid jobs were identified as the most likely groups to turn to friends and family for financial support. The study conducted by Fair4All Finance in collaboration with Ipsos also indicated that a quarter of households would struggle to afford a £500 emergency bill without borrowing. Kate Pender, the head of Fair4All Finance, stressed the need for accessible and affordable credit options to prevent individuals from jeopardizing their relationships by relying on informal borrowing sources like friends and family.
While borrowing from loved ones may seem like a feasible option to avoid high-interest loans, some individuals may unknowingly turn to loan sharks, leading to escalating debt and strained relationships. Dave Benbow, from the England Illegal Money Lending Team, warned about the dangers of borrowing from unregistered lenders or loan sharks disguised as friends. To prevent financial strain and relationship fallout, Moneyhelper advised individuals to carefully consider borrowing from family and friends, suggesting good communication, planning, and written agreements to manage lending and borrowing effectively
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