Lending to friends 'can cause difficulties'
Published On 31 August 2007
More and more people are helping friends and family out of their debt problems by lending them money, an industry expert has claimed.Stephen Rose, director of the Debt Advice Bureau, explained that it was vital people drew up written agreements whenever they lent money to the relatives or friends.
A recent study by DebtSmart.com showed that 70 per cent of respondents had lent money to a family member in the past, but just 58 per cent had been fully repaid.
Furthermore, Mr Rose said that people often prioritised paying friends back before the dealt with debt from other financial institutions.
Mr Rose added: "There are cases where the person who's borrowed from a family member wants to pay them back over and above [repaying] the proper creditors… That can result in bankruptcy restriction order.
"Whether you should lend to friends or family is a completely subjective thing. You can't say: 'Don't lend to your son'. [But] it's not a good position to be in where there are problems in getting the money back."
"Think about how much damage it might do, particularly in the case of a friendship, if they couldn't afford to pay you back for whatever reason."
Recent figures show that over 16,000 people declared themselves bankrupt in the UK in the second quarter of 2007.
