When Family Matters: Borrowing from Loved Ones Surpasses Buy Now Pay Later Loans

In a revealing new survey conducted by Fair4All Finance, it has been highlighted that more people are borrowing from family and friends than utilizing Buy Now Pay Later (BNPL) loans. The survey, which involved over 4,000 adults across England, Scotland, and Wales, found that 26% of respondents borrowed from family, while 25% turned to BNPL options, and 15% reached out to friends for financial help this year.

The primary reason for seeking help from friends and family is the denial experienced from traditional lending institutions such as banks, often leading to reliance on loved ones for small amounts—typically under £250. Carla McLoughlin, a 42-year-old mother of three, shared her experience of relying on her mother for short-term monetary support, stating it’s essential for managing weekly expenses. However, this reliance can strain relationships, with 9% of family borrowers noting that it hurt their familial connections, and that figure increases to 17% for friend-related borrowing.

Interestingly, the dynamics of these loans can become complicated, as some individuals charge interest on borrowed money. Val Lucus, Carla’s mother, revealed her difficulties in lending to relatives who do not repay, making the situation stressful. The phenomenon of borrowing cash emphasizes the precarious financial state of many households, especially for younger individuals, families with children, and those in low-paying jobs or on zero-hours contracts. Alarmingly, 25% of all households admitted they wouldn’t manage a £500 emergency bill without borrowing.

Real-life examples, such as Carla and Val’s mutual support system, demonstrate that while borrowing can sometimes enhance relationships, it can also lead to tension and misunderstandings. Kate Pender, head of Fair4All Finance, commented on the urgent need for expanding access to safe and affordable credit, emphasizing that no one should risk personal relationships to cover essential costs.

The report also sheds light on the dangers of unregulated lending, with 4% of those surveyed having turned to loan sharks within the past year, unknowingly putting themselves in precarious situations that often leads to spiraling debt due to excessive charges. Discussions surrounding borrowing highlight the need for honesty, clear agreements, and proactive financial support strategies, suggesting to lend thoughtfully and explore alternative options like credit unions for those needing assistance.