A report by StepChange debt charity has found that the number of people seeking debt advice, who owe money to family and friends is rising and the average amount borrowed is now more than £4,000.
The charity’s figures from the first half of 2016 show that 28% of the charity’s clients now owe money to family and friends, compared to 20% in the same period in 2014. The total amount they borrowed from friends and family is now almost £200 million, up 72% during the same period.
The research shows that debt can damage relationships, with one in three indebted people reporting negative effects caused by their financial problems and one in 20 revealing a break-up as a result. The charity is warning that borrowing from friends and family can make the problem even worse and brings other risks, including possible delays to seeking debt advice.
The figures come from the charity’s Statistics Mid-Yearbook, due to be released next week.
The charity’s latest statistics show that the average debt to friends and family among its clients has risen from £3,176 in the first half of 2014 to £4,046 in the same period this year, an increase of 27%. The total amount owed to friends and family has grown from £115 million to £198 million over the last two years, an increase of 72%. As a proportion, 28% of the charity’s clients owe money to friends and family, up from 20% in 2014.
In a poll of over 1,000 people in financial difficulty, StepChange Debt Charity found that 31% reported negative effects on their relationship caused by debt, with 5% saying it led to them breaking up. With the added pressure of the friend or family member being their lender, StepChange Debt Charity says it could cause even further damage to someone’s relationships.
The charity is also warning that although borrowing from loved ones might seem like a useful and affordable way to avoid serious financial difficulty, it might not solve the problem long term if the person is already struggling. When people are in problem debt, taking on more borrowing can sometimes mean a delay in tackling the underlying problem and it can make a debt problem more severe and more entrenched.
Mike O’Connor, Chief Executive of StepChange Debt Charity, said: “It is good that people support their friends and family, but lending them money can bring serious and unexpected problems. If repayments to a family member or friend are then missed, or more money is needed to make ends meet, debt can cause serious damage to their relationships as well.
“Lending money to help someone you care about is understandable, but if they are already in financial difficulty, more borrowing is not necessarily the answer and it can make things worse. People need to take practical action to solve the underlying debt problem and taking debt advice is vital.