Get A Loan From Your Friends – A Good Idea?

A need to get a loan is a cry by many and the effects of the recession have caused a new type of lending to emerge, as people turn to the ‘Bank of Friends’ to borrow.

According to new research from the Post Office® people have borrowed over £7 billion from their friends. Over a quarter of adults have lent money to an average of four friends in the past 12 months, each borrowing an average of £133.

Worryingly though people struggle with their debts, less than half of the money borrowed in the last year has been repaid, with an outstanding balance of just under £3 billion owed by friends to friends.

Even more worryingly some 18% of friends have lent more than they can actually afford, potentially opening themselves up to debt problems.

With no ‘official‘ rate of interest imposed by the ‘Bank of Friends’, borrowers have offered alternative and imaginative ways to pay back the favour to their friends with the most common being alcohol. The top five alternative ways to pay back the financial favour are alcohol, a favour in return,  a thank you kiss or hug, a meal out/ cooked dinner and a thank you card.

Perhaps a cautionary message is that over 40% may be reconsidering their friendships after receiving nothing as a thank you.

Doug Strachan, Director of Financial Services at the Post Office, said: “Understandably, millions of households across the UK have needed to tighten their purse strings as the recession has taken its toll, and with money hard to come by from many lenders, people can be thankful that they have such good friends they can rely on.

“Not only does this research show another side effect caused by the recession, but it highlights how people want to help others, outside of their immediate families, through tough times. However, our survey did reveal that one in five people are lending more than they can afford, so the is Post Office urging people to make sure they don’t put themselves, or their household, into financial difficulty when helping others.”

************

Get our FREE MoneyHighStreet.com newsletter to keep up to date with all our latest personal finance tips, news and reviews as well as some fantastic discounts and offers.

Sign-up now – and you get the chance to win a £100 Post Office gift card just in time for Christmas!