While official sources such as the Bank of England can tell us how much money people are borrowing on loans and credit cards, the figures don’t include “unofficial” loans between friends and family members. As a result, the official figures may not give us the full picture of what steps people have taken to make ends meet.
But a new NerdWallet survey offers some insight: Three in five (60%) UK adults have asked to borrow money from friends or family at some point, according to the survey conducted online by The Harris Poll among 1,100 UK adults from 29 June to 10 July 2023. Of this group, 37% did so because they needed the money to pay a bill and 26% needed it to buy food at the supermarket.
These findings indicate that a significant number of people may have relied on the help of their loved ones to cover essential living costs.
Our survey highlights the hidden world of borrowing from friends and family, revealing who is most reliant on their loved ones for financial support and what the money is needed for. We also discover some of the most common problems people experience when they borrow from or lend to friends and family.
Key findings
- Three in five (60%) UK adults have asked to borrow money from friends or family, the survey found.
- Of those who asked to borrow money from friends or family, 37% did so to pay a bill and 26% to buy food at the supermarket, according to the survey.
- More than two in five (44%) UK adults say feeling too embarrassed would prevent them from asking to borrow money from friends or family, the survey found.
- Two in five (41%) of those who have lent money to or borrowed money from family or friends have experienced issues afterward, according to the survey.
Borrowing for bills
Our survey found that young adults and families are more likely to rely on their loved ones to help with money.
Roughly four-fifths of Generation Z (82% of ages 18 to 26) and millennials (80% of ages 27 to 42) say they have asked to borrow money from friends or relatives, compared with 68% of Generation X (ages 43 to 58) and 32% of baby boomers (ages 59 to 77).
And more than three-quarters (78%) of UK adults with children under 18 living in the household have asked to borrow money, compared with 50% of those without any children living with them.
In some cases, borrowing money from friends or relatives is increasingly crucial, with rising interest rates and soaring food prices failing to match average wage growth.
Young families may be particularly vulnerable and struggling with the rising cost of living, as they may not have sufficient income or savings to help them cover childcare costs, bill increases or unexpected expenses. Turning to loved ones for help may be inevitable for some.
The most common reason for asking to borrow money from friends or family among those who asked was to pay a bill (37%), such as a mortgage or utility payment. Gen Z, millennials and Gen X who have asked to borrow money are more likely than their baby boomer counterparts to say it was because they needed it to pay a bill (36%, 44% and 38% vs. 22%, respectively), according to the survey.
The next most common reason given for asking to borrow money from friends and family was to buy food at the supermarket (26%), followed by paying for important repairs (23%), such as fixing a car or boiler.
Gen Zers who have asked to borrow money are more likely to have done so to pay for food at the supermarket (36%), in contrast to 6% of baby boomers.
The other reasons those who’ve asked to borrow money from friends or family did so are:
- to pay for a deposit to buy or rent a house (16%)
- to pay for a car for commuting or other work-related reasons (15%)
- to have a day out (14%)
- to pay off a payday loan (11%)
- to cover the costs of starting a business (9%)
- to pay for a holiday (9%)
- to buy clothes (8%)
- to buy furniture (7%)
- to pay for a professional work-related course (7%)
- other (11%)
Many are too embarrassed to ask
Even though borrowing money from a close friend or family member can help when finances are tight, some people may feel uncomfortable asking for a loan.
More than two-fifths (44%) of UK adults in the survey say feeling too embarrassed would prevent them from asking to borrow money, while 39% say they wouldn’t ask because they think it’s important not to rely on others for financial support.
How comfortable people feel about asking for money can depend on the person the borrower asks and their relationship with them, as tensions can arise if the loan can’t be repaid.
More than a quarter (29%) of UK adults say they wouldn’t ask to borrow money from friends or family as they would be worried about not being able to pay back the money. And 10% wouldn’t ask for a loan because they don’t think the friend or family member would agree to lend them any money.
When lending to friends and family goes wrong
Even though a loan from a friend or family member might seem to be an easy option, difficulties can emerge. Borrowing money from family and friends could damage relationships, or even end them completely if something goes wrong.
Our survey reveals that problems are relatively common, with two-fifths (41%) of those who have lent money to or borrowed money from friends and family experiencing issues after. More than one in ten argued or disagreed over the amount borrowed (11%) or about the amount or timing of repayments (12%). And 7% said they stopped speaking before the money was repaid and they hadn’t received the full amount they agreed to back.
While some people may write off the money if not repaid, others will escalate the matter. Of those who have lent or borrowed money from a loved one, 6% went to a small claims court to claim back the money they were owed.
Younger people were the most likely to say they had run into problems. More than half of Gen Z (56%) and millennials (52%) who have lent money to or borrowed from friends and family experienced issues after, compared with 35% of Gen X and 23% of baby boomers.
The smarter way to borrow
To minimise the chances of falling out over money with a friend or family member, the lender and the borrower need to be clear on the terms of the loan from the beginning. It’s a smart move to put the agreement in writing, including how and when the money will be repaid.
Before agreeing to a loan as either the borrower or lender, ask yourself:
- Have you considered alternatives such as a loan or guarantor loan?
- Can you afford it?
- What is the loan needed for?
- How likely is it that the loan will be repaid?
- Are you prepared for the effect a loan could have on your relationship?
- Are there any tax implications? For example, if the lender charges interest on the loan, they may need to declare it to HM Revenue & Customs as taxable income. Seek professional advice if you need more guidance.
Learn more about do’s and don’ts to consider before borrowing from friends and family.
Methodology
This survey was conducted online by The Harris Poll on behalf of NerdWallet UK from 29 June to 10 July 2023, among 1,100 UK adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 3.21 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Sarah Fleming at [email protected].
Disclaimer
NerdWallet disclaims, expressly and impliedly, all warranties of any kind, including those of merchantability and fitness for a particular purpose or whether the article’s information is accurate, reliable or free of errors. Use or reliance on this information is at your own risk, and its completeness and accuracy are not guaranteed. The contents of this article should not be relied upon or associated with the future performance of NerdWallet or any of its affiliates or subsidiaries. Statements that are not historical facts are forward-looking statements that involve risks and uncertainties as indicated by words such as “believes,” “expects,” “estimates,” “may,” “will,” “should” or “anticipates” or similar expressions. These forward-looking statements may materially differ from NerdWallet’s presentation of information to analysts and its actual operational and financial results.
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