PayPal uncovers UK’s £4.71 billion ‘friendship debt’

A year into the credit crunch, research from leading online payment provider PayPal has found that it's not just the banks struggling to reclaim outstanding loans. Half of Britain's 48 million adults say they have lent money to friends or family in the last 12 months, but nearly a quarter (24 per cent) of them are still waiting to be paid back, with many resigned to never seeing the money again. With the average cash still owed standing at a huge £823 per person, PayPal expects many hard-up Brits to want help in getting this ‘friendship debt' repaid.

Typically, we give loans to help a friend or family member with unpaid bills and rising food costs, perhaps a symptom of the current economic climate. While a large number of people (43 per cent) say the person they last lent money promised to pay it back ‘asap', these promises aren't always kept: more than four in 10 (45 per cent) say they feel awkward asking for their money back.

However, PayPal can help bashful Britons ask for their money back in a friendly way. With the ‘Send Money' service, (paypal.co.uk/sendmoney) all people need is their friend's email address or mobile number and they can transfer money owed straight away without needing to remember or ask for sort codes or account numbers. And PayPal's new tongue in cheek ‘Give A Little Back' email campaign provides people with a playful way to remind their friendship debtors that it's time to return the cash.

Timely repayment of friendly debts can be important in saving friendships and keeping the peace in families. PayPal's research found that unpaid loans to friends and family can have serious consequences, as almost a quarter (24 per cent) of people say that borrowing or lending money has resulted in an argument with a friend or family member. While most of these arguments are resolved, one in 12 (8 per cent) Britons say a rift still remains with a friend or member of their family.

The top five reasons people last lent a friend or family member money:

For payment of/towards a bill they couldn't afford (e.g. phone, electricity) (14 per cent)

Grocery shopping (10 per cent)

To contribute toward a large purchase (e.g. house, car) (10 per cent)

For a night out (9 per cent)

Debt repayment / financial crisis (e.g. went over borrowing limits, lost job, couldn't meet repayments) (8 per cent)

Mark Hodson, PayPal UK's Marketing Director, comments: "It's only natural that we're happy to lend money to a friend in need. But when a debt is personal, bashful Britons find it very difficult to pluck up the courage to ask for it back. As our research shows, these friendship debts can be a lot more than small change, and there comes a time when we need our money back.

"If you're lending money to friends or family, it's worth agreeing up front when you'd like to get the cash back. This can save a lot of hassle and embarrassment further down the line."

PayPal's ‘Send Money' service makes it safer and easier to transfer money via email or mobile phone. There are no fees for payments to friends and family that are funded via a bank account or PayPal balance. Any money transferred becomes available immediately.

Mark Hodson continues: "To help reduce the awkwardness of asking your mates to repay you, we've created a tongue in cheek email that allows you to send a personalised reminder to those dragging their feet. The email provides simple and immediate way of getting people to repay money instantly via PayPal. There's no need for anyone to remember, let alone share, their bank account details."