People 'turning to family and friends' for loans

By Helen Gradwell

The Aviva Family Finances report is an in-depth study into the financial needs of the modern UK family. The most recent report found a number of things: for example, the average family's monthly income has fallen from £2,150 in May 2021 to £2,003 now - that's a 7% decrease. This can be explained by a number of factors - like families taking time off to care for their children over the summer.

The average family debt (excluding mortgages) has also risen - from £9,314 in May 2021 to £10,563 now. This debt has come primarily from personal loans (£8,555 for the average family), credit cards (£5,134) and overdrafts (£4,423).

People have also been borrowing money from their friends and family, however. The average amount borrowed has more than doubled over the last quarter, from £701 in May 2021 to £1,545 today. This is the highest figure since the Aviva Family Finances report began.

So why are people borrowing more from their family and friends - rather than established financial institutions? Well, for one, it's usually less formal. Somebody you know and love is far less likely to give you a strict payment plan for the loan - so paying it back is usually more flexible. And it's often a good way to avoid the fees and charges associated with formal borrowing.

Borrowing from family and friends may have rocketed since May because people are trying to find ways to entertain their children over the summer. An informal loan is usually a much easier way of getting hold of the funds needed. Not paying these loans back in a reasonable amount of time, however, can still be harmful. You may not get charged 'late payment' fees - but you risk damaging a relationship. So - as with all loans - it's still really important to know that you can pay it back before you take it out.

Tags: Aviva, debt, mortgages, overdrafts, loans

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