If you were really struggling for money would you turn to your friends for a loan? Well according to a recent study, an increasing number of cash-strapped families are turning to their chums and asking for an informal loan to help them out.
According to Aviva’s family finances report, the typical informal loan amount reached up to £1,545, a huge increase compared with last years figure of £701.
Aviva believe that the rise could be down to individuals trying to avoid taking out formal bank loans at all costs in a bid to also avoid additional costs and charges.
In addition to the above, the Aviva report also found that levels of family debt rose from an average of £9,314 in May to £10,563 by August – a huge increase in such a short space of time.
Whilst debt rises, average family incomes appear to be falling, dropping from £2,150 in May to £2,003 by August. The percentage of “well-off” families also appears to be reducing, with the proportion of families who have an income of more than £2,500 a month falling from 36% to 31% in a year.
If you and your family are struggling to organise your finances and you are considering asking your friends or extended family for an unofficial loan, be sure to weigh up the pros and cons of doing so.
You may believe that your close relationship would mean you are not a risk of falling out, but when it comes to money the state of play changes. What if you can’t afford to pay them back in the agreed time frame? Or what if they suddenly need the money but you can’t give it back?
Consider your options carefully – it may be that a bank loan costs you more money but less grief, and it’s up to you to decide which is the lesser of two evils.
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