Family loans 'losing Britons money'

17/10/2008

Britons are potentially putting themselves at risk of debt - by lending large sums to family and friends.

According to AA Personal Loans, 21.4 million people have lost money in this way - loaning an average of £607.22 a time.

The firm also found, however, that just 50 per cent of the lenders get their money back, with many of the remainder being too embarrassed to ask for repayment.

Kevin Still, EuroDebt director, said: "Turning a close friend or family member away when they are in financial difficulty can be very hard and you need to ensure that it doesn’t create a potential financial problem for you."

He added: "We often find that parents have lent money to their grown up kids with only a forlorn hope that they will see the money again, but in some instances they may have borrowed the money themselves.

"We are also seeing too many people falling prey to the likes of pay day loan companies thinking that they will just borrow £500 until they get paid and find it is an unbreakable cycle with APRs of upwards of 1,000 per cent."

The AA's research suggested that the loans could become more and more common, as the economic downturn continues and personal finances are put under strain.

Just over one in four poll respondents said that they were now more likely to borrow money from their families and friends than they were last year.

Tags; Debt Management and Banking, Young Family Finances, Retirement Money Problems, Credit Card Lifestyle, Recent Graduate Debt,

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