Why you should never lend money to your friends and family


Scrooge McDuck, the king of refusing personal loans to friends and family | Disney

Money is a notoriously touchy subject, especially when it comes to family and friends. Financial problems, disagreements or conflicts are at the heart of many failed marriages, and pent-up jealousies or inter-family theft can strain even the strongest family bonds. Personal loans between family and friends, however, are quite common. And according to new research, the amount we ask – and what we spend it on most often – can be a bit surprising.

iLoan interviewed more than 800 people to examine the intricacies of personal loans between family members and friends. Interestingly, almost all of the survey respondents had applied for financial help at some point with a personal loan, the majority of which occurred in their teens and twenties. Perhaps most surprisingly, how often people ask their colleagues for loans – and how often those colleagues are willing to pay money.

“According to the survey, 97% of those polled said they had borrowed money from friends or family at least once in their life. The average amount over a lifetime – borrowed by both single borrowers and serial borrowers – is $ 8,546, ”says iLoan’s brief.

“Those who need a larger loan have the best luck with their coworkers, receiving an average of $ 6,462. According to the survey, friends lend the smallest amounts, with an overall average of $ 3,319. “

Personal loans and repayment

A personal loan in action

A personal loan in action | iStock.com

iLoan has also included a very large and comprehensive infographic displaying the results of their survey, which you can see on their site (it’s too big to be included here). But on reading it, one thing immediately jumps out in the eyes of potential lenders who ask them for financial assistance: Getting your money back is not easy.

“The bad news for friends and family who lend is that only half is paid off in full. About a third of borrowers repay part of the loan and 14% say they do not repay a penny. In addition, almost nine in 10 borrowers pay no interest and three-quarters have no fixed due date (although colleagues, brothers and cousins ​​are the most likely to charge interest and enforce deadlines), ”writes the iLoan team.

The other interesting, and perhaps the most surprising thing the study found? That these personal loans – which are often not paid back on time, if at all – don’t tend to damage relationships as badly as you might imagine. In fact, some people, although relatively few in number, cite lending to family and friends as a way to strengthen their relationship rather than straining it.

“When asked if loans put financial strain on friends and family who lend money, 74% of borrowers said no; however, more than half of lenders say there is at least some degree of financial stress, ”the study says. “Looking at personal relationships after a loan, 83% say they are unchanged and 6% say the relationship is improving. Relationships suffer most often when grandchildren borrow from grandfather or when coworkers lend each other money, according to the survey.

Hand holding out money

Hand holding out money | George Marks / Retrofile / Getty Images

What can you take away from the survey? Two main points: First, if you lend money to your loved ones, there is a good chance (around 50%) that you will not get the full amount back. And second, that people are clearly quite lenient and flexible in these situations, as evidenced by the large number of respondents who said that a loan did not cause financial stress.

If you are stingy with money or share a house or last name with a group of serial borrowers, you might not feel so bad about telling them ‘no’ when they apply for a loan. . Knowing that there is a 14% chance that you won’t see a dime of that money will certainly give you pause. But of course, complex family issues and the dynamics of friendships play an extremely important role in these situations as well.

There may be some justification for you to hold your wallet firmly, but no one will be able to judge a specific situation with a specific person – be it a friend or a family member – other than you. Saying ‘no’ to your loved ones can be difficult, and we know that money can cause all kinds of problems for families. But if you’re hesitant to lend to your sketchy uncle, the numbers show that you might want to trust your gut, or at least feel comfortable knowing there’s a good chance you’ll never see each other again. money. Perhaps the best advice is never to lend money to your friends and family, but rather to give the money as a gift, if you are able and if you want to.

Follow Sam on Facebook and Twitter @SliceOfGinger

More from Money & Career Cheat Sheet:

Source link


Comments are closed.