How to borrow from family and friends responsibly
The official statistics show that lending to family and friends is very common. Specifically, it is very popular among the younger generation, which is understandable because they don’t have enough savings and they need time to build their wealth.
A 2014 Payments Council study estimated that informal loans run into the billions. In August 2011, an Aviva survey found that 63% of people had seen an increase in informal lending. More recently, in 2016 debt charity StepChange reported that more than a quarter of its clients, around 28%, owe money to loved ones.
Informal lending seems to be particularly rife amongst parents and children. National Debtline reported at the end of 2016 that around 67% of 18–24-year-olds are now borrowing money from family, owing to an average of £2,248.
How it works?
- Do not be afraid to ask your friends if need financial help, you will be surprised how responsive they will be if you get repayment plan set up
- Get reminders when repayment is due
- Set up budgeting goals to make sure there are sufficient funds available
- Receive warnings well in advance so that you have plenty of time to adjust your spending