Family Loans Help Beat Credit Crunch Debt

As the credit crunch bites many are turning to family members for loans as an easier option to get access to money as other credit facilities are not available to them.

Research by Aviva shows that there has been a significant increase in family members approaching relatives for loans with many doing so as a direct result of the credit crunch.

Its recent Real Retirement Report shows that people who were in debt to family members and friends owe them substantially more than other sources of borrowing such as overdrafts or store cards.

Whilst the majority of such lending is for small amounts, some in debt to their family owe several thousand pounds.

The Scottish are the most generous with Scottish families lending the most to each other – on average £3,200, above the UK average of £2,300. The Scots are also less likely to charge interest on the loan too or even expect the money back.

Clive Bolton, ‘at retirement’ director at Aviva, commented; “The credit crunch has had an impact on all members of society; particularly it seems for those in retirement whose available credit lines may be limited.

“The implications of this seem to reflect a change in family dynamics from the late twentieth century when greater independence was achieved through the wider availability of credit, back to a time when the preservation of wealth and financial reliance was largely focused upon the family.

“However, it is crucial that consumers in financial difficulty seek the right professional advice, in addition to that of their families, to ensure they are aware of all options available to them when making important decisions about their long term financial security.”

If you are looking to borrow from a family member, you might be interested to know that if you approach a female relative you’ve the highest chances of getting a loan at the cheapest interest rate!

MoneyHighStreet comments: “You do need to think very carefully about taking out any form of loan. Unless you can pay it back you risk the danger of falling further into debt. Whilst a family member may indicate they don’t need the money back, and may not need it at that point, what happens if their circumstances change and they do suddenly need it?

“Consider whether you need the money for the long term or whether you’re looking for a short term loan.

“Are there any other options available to you to borrow money? If its your credit rating that’s causing issue with getting a credit card for example, have you looked at whether you can improve it? There are some simple steps you can take, first off just by checking your credit report you may find inaccuracies in the information reported.

“Do you have any assets you could use to secure a loan – perhaps a valuable watch such as a rolex, some other jewellery or art for example.