Britain’s £44.6 billion hidden debt
Research from MORE TH>N Legal Services has revealed the total amount of unpaid loans between friends or family members stands at a staggering £44.6 billion, and one in three people (32%) admit such borrowing has caused rifts that may never be repaired.
The average Brit ends up lending over £2,250 to family and friends over the course of a lifetime. Usually coming without interest charges and set dates for repayment, these loans are often considered an easy option, however, two in five borrowers (40%) admit they won't be able to afford to repay the money lent. Even worse, a quarter of borrowers (24%) admit to taking loans from loved ones with no intention of ever paying them back.
It seems inevitable that disputes arise, but they could be avoided with a contract and defined terms for borrowing said 70% of those surveyed. To help address the problem, MORE TH>N Legal Services has now launched an online ‘family lending' document, providing options for instalment payments and interest charges. The contract is easy to download and helps friends and family make a more formal and up-front agreement about loaned money and how it will be repaid - perhaps meaning borrowers will take their obligations more seriously.
The research gives further alarming insights into the finances of the country with the most common reason for borrowing from family and friends (31%) being not having any savings, close behind is not being able to get a loan from financial providers (22%). Perhaps most worrying of all, is the 23% of people that borrowed purely because their income doesn't cover the cost of living. This is further illustrated by the fact people are using the money for day to day costs such as food shopping (22%), rent (11%), and to pay off existing loans (12%).
Unsurprisingly, it is parents that seem to go the furthest lengths with 34% dipping into savings accounts to support their kids. A further, 12% have taken out a fresh loan and 8% have racked up credit card debt.
MORE TH>N Head of Legal Services Matt Pernet said: "People will often turn to those closest for borrowing, but as our research shows, it can turn into a great source of tension for families and friendships. This can often be prevented by laying out clear terms for repayment. MORE TH>N Legal Services provides downloadable contracts for loans between family and friends, that are simple and easy to fill out and will go a long way to help prevent feuds over money."