Three in five UK adults have asked to borrow money from family or friends but when it comes to finances, it can lead to fallouts, a study reveals.
Of those who borrowed money from a loved one, a quarter (26%) did so to pay for a supermarket shop and over a third (37%) did so to cover a bill.
However, there are risks in borrowing in this way, as 41% of the 1,100 adults surveyed who lent or asked for cash encountered an issue afterwards, according to NerdWallet.
A total of 7% stopped speaking to each other after the loan, while one in twenty (6%) had to resolve their differences in a small claims court.
More than half of Gen Zs (aged 18-26) had a problem after the lending agreement, compared to just under a quarter of baby boomers.
Gen Zs were also the most common cohort to ask for money, with 82% of this age group requesting financial help.
Meanwhile, the cost-of-living crisis is also having an impact on the older generations, as 68% of Gen X (aged 43-58) and 32% of baby boomers (59 to 77) requested help from a relative or friend, the poll conducted between June and July 2023 revealed.
‘It’s a smart move to put the agreement in writing’
As well as essential everyday costs, Brits also asked to borrow money from loved ones to pay for important repairs (23%), a day out (14%), and to pay for a holiday (14%).
Rhiannon Philps, personal finance expert at NerdWallet UK, said: “Borrowing money from friends or relatives is quietly common, particularly now with rising interest rates and soaring food prices failing to match average wage growth.
“Young families can be particularly vulnerable and struggling with the rising cost of living as they may not have sufficient income or savings to help them cover childcare costs, bill increases or unexpected expenses. Turning to our loved ones for help is inevitable for some.”
However, she added: “To minimise the chances of falling out over money with a friend or family member, the lender and the borrower need to be clear on the terms of the loan from the beginning. It’s a smart move to put the agreement in writing, including how and when the money will be repaid.”
Below, NerdWallet shares six questions to consider before borrowing or lending money:
- Have you considered alternatives such as a loan or guarantor loan?
- Can you afford it?
- What is the loan needed for? Is it for a good reason or could the money do more harm than good?
- How likely is it that the loan will be repaid?
- Are you prepared for the effect a loan could have on your relationship?
- Are there any tax implications? For example, if the lender charges interest on the loan, you may need to declare this to HM Revenue & Customs as taxable income. Seek professional advice if you need more guidance.
