Consumer: Why borrowing from friends and family is on the increase

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“Neither a borrower, nor a lender be,” wrote William Shakespeare. But if anything, the habit of sharing money out between family and friends appears to be on the increase.

Whether it’s offering a loan to a younger relative to help them make the leap onto the housing ladder, or buying a few drinks for a friend on a night out, several reports have suggested that we’re becoming more used to passing cash back and forth between loved ones.

One recent survey, carried out for mobile payments scheme Paym, suggests that the younger generation in particular sees the “sharing economy” as the norm. They found that 18 to 24-year-olds are the most likely to borrow and lend cash among friends and family as a regular part of managing their money, and many said they transfer money every few weeks for drinks, food or transport costs.

Meanwhile, more then half (51 per cent) of workers and colleagues told Paym that they rack up a list of “IOUs” while purchasing coffees and lunch for each other.

Advances in technology, such as mobile payments and online banking have made it easier for people to offer a friend or a relative a small loan as a short-term stop-gap - as well as making it easier for that friend or relative to pay them back.

So what is the etiquette for sharing out money between family and friends?

Well, Paym’s research among more than 2,000 people found that £100 tends to be the largest sum people feel most comfortable sharing. Three-quarters thought the reason for borrowing money should always be explained and 77 per cent believe they have the right to turn down a request for money if they do not approve of what it is for.

While often this lending and borrowing between family and friends can make life easier, in certain situations there can be serious consequences.

Because for some people, it’s not just a case of borrowing a fiver from a pal for a couple of drinks or lunch. Charity StepChange, which deals with people who are in problem debt, says that the total amount of money owed by its clients to friends and family reached £235m in 2014 - marking an £83m increase in just two years.

More than one in five (21 per cent) people advised by the charity last year had outstanding debts owed to friends and family. The average amount they owed to their loved ones was £3,265. The charity said this reflects the fact that many people turn to their loved ones as an informal source of credit when they are struggling.

Perhaps inevitably, this can do long-term damage to their relationships: a recent survey of the charity’s clients found that 56 cent of those asked said their relationship with their family had grown worse as a result of their debt problems.

But another report says... borrowers ‘confident about credit card debts’

The vast majority of people with debts such as personal loans, credit cards and overdrafts are feeling confident about their ability to repay what they owe, a report has found.

But while 83 per cent of those surveyed are either confident or very confident about meeting their future repayments, one in 33 (three per cent) are not at all confident about their ability to do so, the research from Lloyds Bank found.

One in 10 (nine per cent) of people surveyed were also not very confident about keeping on top of their repayments, while a further five per cent were unsure.

The research was carried out among nearly 4,000 people aged between 18 and 75 years old who hold at least one type of non-mortgage debt between January and March this year.

It has been estimated that Brits spend £5,400 a second on their credit cards. People in the UK owed £1.474 trillion at the end of march 2015. This is up from £1.445 trillion at the end of march 2014 – an extra £579 per uk adult.

The average total debt per household – including mortgages – was £55,197 in March.

The revised figure for february was £55,086.

That’s an average debt of £29,186 per adult in March – around 115.4 per cent of average earnings. this is up from a revised £29,127 in February.