New research by Fair4All Finance shows adults in England, Scotland and Wales are more likely to borrow from family and friends than to use Buy Now Pay Later (BNPL) products this year.
The survey of more than 4,000 adults found 26 percent had borrowed from family and 15 percent had borrowed from friends in the past year, compared with 25 percent who used a Buy Now Pay Later product. Most of the amounts reported were below £250.
Many people said they turned to relatives because they could not access loans from banks or other formal lenders. The research also shows informal borrowing sometimes damages personal relationships. Nine percent of those who borrowed from family said it weakened the relationship, rising to 17 percent for those who borrowed from friends. Some borrowers reported paying back more than they received, with 16 percent saying they paid extra to a friend lender and 8 percent saying the same of family lenders.
For 42 year old Carla McLoughlin, small loans from her mother help cover basic costs between paydays. “It is just to tide us over for a week or two until we get paid,” she said. Her mother, Val, said managing repayments can be difficult. “You are constantly chasing it up. That can be difficult,” she said.
The research highlights that younger adults, households with children and people in lower paid or insecure work are most likely to rely on informal borrowing. It also found that about a quarter of UK households would struggle to cover an unexpected £500 expense without taking on debt.
Fair4All Finance warned that lack of access to affordable credit pushes some people toward illegal lenders. Four percent of those surveyed said they had borrowed from an illegal money lender in the past year. Officials from enforcement teams say borrowers can be tricked into thinking an illegal lender is a friend and then face extra charges that trap them in debt. Fair4All Finance chief executive Kate Pender said there is a need for better, safer lending options so people do not have to risk their closest relationships just to cover essential costs.
Debt advisers recommend putting repayment terms in writing even for family loans and exploring community lenders such as credit unions as safer alternatives to informal or high cost options.
