A growing trend of individuals is opting for family support over Buy Now Pay Later loans, a recent survey reveals. But here's the catch: it's not always a smooth ride, and relationships can take a hit.
The survey, conducted by Fair4All Finance and shared exclusively with the BBC, paints an interesting picture. While 25% of respondents had taken the Buy Now Pay Later route, an intriguing 26% turned to family, and 15% to friends, for financial assistance this year.
But why the shift? For many, traditional financial services like banks have become a no-go zone, leading them to seek help from loved ones. However, this isn't always a risk-free strategy, as some of these loans still carry interest.
Take Carla McLoughlin, a 42-year-old mother of three. She relies on small sums from her mum to make ends meet, explaining, "It's just to get us through a week or two until we get paid."
However, this dynamic isn't without its challenges. Of those who borrowed from family, 9% reported a weakened relationship, a figure that jumps to 17% when borrowing from friends. Different expectations about repayment can sour these relationships, and for some, the dynamics become even trickier when interest is involved.
Val Lucus, Carla's 63-year-old mother, has lent to other family members who didn't repay. "You're constantly chasing it up. That can be difficult," she shared.
The Impact on Relationships
The survey also revealed that 16% of people who borrowed from friends and 8% of those who borrowed from family were charged interest. This adds a layer of complexity to an already sensitive situation.
"Some people say they'll pay you back but then they don't. Then they're messing it up for themselves," Carla added, highlighting the potential strain on relationships.
A Last Resort?
Many turn to family and friends as a last resort, having been denied by banks or credit card companies. For some, it's a more affordable option to avoid overdraft fees or high-interest short-term loans.
Kate Pender, the boss of Fair4All Finance, emphasizes the importance of accessible credit: "No one should have to risk their closest relationships just to cover essential costs. We need to ensure safe and affordable credit options are available to all."
However, the survey also revealed a concerning trend: 4% of those surveyed had turned to loan sharks, or unregistered lenders, in the last 12 months. This figure might be higher, as some borrowers may not realize they're dealing with loan sharks, mistaking them for "friends."
Dave Benbow, head of the England Illegal Money Lending Team, warns, "All too often, we see situations where extra charges are added, debts spiral, and borrowers find themselves trapped."
Navigating the Risks
Moneyhelper, a government-backed website, advises careful consideration before borrowing from family or friends. They suggest a written agreement and good forward planning to mitigate potential relationship strains.
So, while family and friends can be a lifeline, it's crucial to approach these situations with caution and clear communication.
Thoughts? Do you think borrowing from loved ones is a viable option, or does it risk too much? Share your experiences and opinions in the comments!
