Have you lent money to a friend,
family or colleague? Did you get it back? If so, you’re one of the lucky ones,
as new figures show that around £2.6 billion went un-repaid last year.
The research was commissioned by O2 Money and showed that almost one in two adults lent cash over the last 12 months, handing over an average of £209.
Yet nearly half of those surveyed are still owed money; in fact the average is £112. So just how risky is lending to friends?
Friends with benefits
Officially it’s known as ‘informal lending’, but you probably think of it as bunging your friend a tenner when he forgets his wallet, or helping your sister out when her boiler explodes.
According to the O2 study, the most common reasons for lending people money are minor things. Maybe they forgot their wallet or you’ve paid a group bill to keep things simple.
But these are relatively small amounts. Some people are lending hundreds or even thousands of pounds. So why would someone choose to borrow from a friend or loved one instead of an official lender?
The research was commissioned by O2 Money and showed that almost one in two adults lent cash over the last 12 months, handing over an average of £209.
Yet nearly half of those surveyed are still owed money; in fact the average is £112. So just how risky is lending to friends?
Friends with benefits
Officially it’s known as ‘informal lending’, but you probably think of it as bunging your friend a tenner when he forgets his wallet, or helping your sister out when her boiler explodes.
According to the O2 study, the most common reasons for lending people money are minor things. Maybe they forgot their wallet or you’ve paid a group bill to keep things simple.
But these are relatively small amounts. Some people are lending hundreds or even thousands of pounds. So why would someone choose to borrow from a friend or loved one instead of an official lender?
Cheaper. But cheerful?
Borrowing money can be a pricey business. For larger amounts, the rate can be as low as 5.9%, but if you want to borrow a couple of thousand pounds or less, you’re likely to pay closer to 20%. And the worse your credit history, the higher the rate you’re charged.
Payday loans charge an average of £25 a week for a debt of £100, making this one of the most expensive ways to borrow emergency cash.
So it’s easy to see why so many people turn to family and friends for an interest-free loan.
And of course, there are some people who may struggle to arrange a loan at all, perhaps because they have a poor credit rating or no real credit history to show they are reliable.
There are services that let you guarantee a friend’s loan – meaning they can borrow money regardless of their credit rating, as long as they can find someone willing to back them – but they’re far from cheap, and you could still end up on the hook for their remaining debt if they fail to meet their repayments.
Borrowing from friends and family can be a lifeline for such people, and keep them away from doorstep lenders or running up vast debts because of high interest.
Having said that, it may be cheap in terms of the interest charged but it can be very expensive in terms of lost friendships and even family feuds. That’s why it’s so important to go through some formalities... To be Continue
Chanzo: yahoo.Co.Tz
Tanzanian Shilling Exchange Rate