Family loans can ‘lead to problems’
Trying to help family members and friends with their financial problems by lending them money can end up making things worse, it was suggested today.
The claim came from Stephen Rose of the Debt Advice Bureau, who said that such loans can cost friendships and lead the lender into financial difficulties if they are not repaid promptly and in full.
However, people being too keen to repay their friends and family and prioritising them over making mortgage and loan payments can also lead to problems.
"There are cases where the person who borrowed from a family member wants to pay them back over and above [repaying] the proper creditors … That can result in bankruptcy restriction orders," explained Mr Rose.
He added that people lending money to family and friends should always ensure they obtain a written agreement detailing the repayment terms.
Recent research by Abbey suggested that the annual value of friend-to-friend loans in the UK is £510 million.
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