Inter-family lending soars in wake of credit crunch
According to research released by Aviva into the ‘secret statistics' of lending between family members, there has been a significant rise in this trend in recent years, with two thirds of consumers (63%) stating that there has been an increase in family approaching relatives for money as a direct result of the credit crunch.
Although two thirds (61%) see it as a positive idea that families are able to turn to each other for financial aide as a first port of call, only 15% of families in the UK are currently lending money to each other on a more regular basis. Although somewhat contradictory in sentiment, this may allude to the fact that finances remain a taboo subject, and although the trend of inter-family lending is increasing, encouragingly, consumers may be seeking professional advice first from organisations such as the Citizens Advice Bureau.
Retirees reach out...
In its recent Real Retirement Report, Aviva found that people who were in debt to family members and friends owed them substantially more than other sources of borrowing such as overdrafts or store cards. In fact, of retirees with this type of debt, those aged between 55 and 64 owe on average £2,100 to family and friends, with this figure increasing to £6,790 for those aged 65 to 74, although the majority of lending between family and friends is likely to be of smaller amounts.
When it comes to family, the recent findings suggest a staggering third of UK consumers would be willing to take out borrowing in their own names, for family members who are unable to obtain credit, possibly due to a lack of available credit lines, a problem often seen in retirement.
The Scottish Clan win in the generosity stakes
It seems that the Scottish are now the most generous when it comes to helping out other family members financially. The findings show that out of the whole of the UK, Scottish families lend the most to each other, with an average amount of £3,200, above the UK average of £2,300.
Not only this, but the findings show that despite 80% of those in England and Wales expecting their money back, with one in ten charging interest higher than bank rates, only 30% of Scots expect to see sight of this money again and if they do, they would charge little or no interest at all.
Brother or sister... Mum or dad...
Although two thirds believe that lending money to each other in the family in the wake of the credit crunch is a good thing, it does seem that it depends who you approach as to what deal you will get!
The findings from Aviva suggest that you would be much wiser approaching a female relative for the highest chances of getting a loan and at the cheapest interest rate, if any interest charge at all. In fact, the results quite clearly show that just 13% of women would charge their family interest on loans at bank rates or higher, compared to 40% of men. However, the findings do show that men lend on average a third more (£2,643) than women (£2,076).
Clive Bolton, ‘at retirement' director at Aviva, commented; "The credit crunch has had an impact on all members of society; particularly it seems for those in retirement whose available credit lines may be limited. The implications of this seem to reflect a change in family dynamics from the late twentieth century when greater independence was achieved through the wider availability of credit, back to a time when the preservation of wealth and financial reliance was largely focused upon the family.
"However, it is crucial that consumers in financial difficulty seek the right professional advice, in addition to that of their families, to ensure they are aware of all options available to them when making important decisions about their long term financial security."