People in the UK are more likely to borrow money from family and friends than to use Buy Now Pay Later (BNPL) services, according to new research from Fair4All Finance.
The survey of more than 4,000 adults across England, Scotland and Wales found that 26% had borrowed from family members and 15% from friends this year, compared with 25% who used BNPL. Most of the sums borrowed were under £250.
Many turned to relatives because they were unable to access loans from banks or other formal lenders. However, the research also shows that personal borrowing can lead to strained relationships.
For 42-year-old Carla McLoughlin, borrowing small amounts from her mother helps her cover basic costs between paydays. “It’s just to tide us over for a week or two until we get paid,” she said.
But the survey found that 9% of people who borrowed from family said it weakened their relationship, rising to 17% for those who borrowed from friends. Some also reported being charged interest: 16% of borrowers who went to friends and 8% who went to family said they paid more back than they received.
Carla’s mother, Val, said lending can be difficult to manage. “You’re constantly chasing it up. That can be difficult,” she said.
The research highlights that younger people, households with children, and those in lower-paid or insecure work are most likely to rely on informal borrowing. It also shows that a quarter of UK households would struggle to cover an unexpected £500 expense without taking on debt.
Fair4All Finance warns that a lack of access to affordable credit is also pushing some people towards illegal lenders. Four percent of those surveyed had borrowed from a loan shark in the past year, though enforcement teams say the real figure is likely higher.
Dave Benbow of the England Illegal Money Lending Team said many borrowers initially believe the lender is a friend. “All too often, extra charges are suddenly added, the debt spirals, and borrowers find themselves trapped,” he said.
Fair4All Finance chief executive Kate Pender said there is a need for better, safer lending options. “No one should have to risk their closest relationships just to cover essential costs,” she said.
Debt advisers recommend putting repayment terms in writing, even when borrowing from relatives, and exploring community lenders such as credit unions as an alternative.
