Average debt to friends and family now over £4,000

_{1 September 2016}

The number of people seeking debt advice who owe money to friends and family is rising rapidly and the average amount borrowed is now more than £4,000, according to new figures from StepChange Debt Charity.

The charity’s figures from the first half of 2016 show that 28% of the charity’s clients now owe money to friends and family, compared to 20% in the same period in 2014. The total amount they borrowed from friends and family is now almost £200 million, up 72% during the same period.

Research conducted by StepChange Debt Charity shows that debt can damage relationships, with one in three indebted people reporting negative effects caused by their financial problems and one in 20 revealing a break-up as a result. The charity is warning that borrowing from friends and family can make the problem even worse and brings other risks, including possible delays to seeking debt advice. 

The figures come from the charity’s Statistics Mid-Yearbook, due to be released next week.

Rapid rise in debts to family and friends

The charity’s latest statistics show that the average debt to friends and family among its clients has risen from £3,176 in the first half of 2014 to £4,046 in the same period this year, an increase of 27%. The total amount owed to friends and family has grown from £115 million to £198 million over the last two years, an increase of 72%. As a proportion, 28% of the charity’s clients owe money to friends and family, up from 20% in 2014.

Borrowing from friends and families can have serious consequences

StepChange Debt Charity is warning that this kind of borrowing can have adverse effects on relationships with family and friends.

In a poll of over 1,000 people in financial difficulty, StepChange Debt Charity found that 31% reported negative effects on their relationship caused by debt, with 5% saying it led to them breaking up. With the added pressure of the friend or family member being their lender, StepChange Debt Charity says it could cause even further damage to someone’s relationships.

The charity is also warning that although borrowing from loved ones might seem like a useful and affordable way to avoid serious financial difficulty, it might not solve the problem long term if the person is already struggling. When people are in problem debt, taking on more borrowing can sometimes mean a delay in tackling the underlying problem and it can make a debt problem more severe and more entrenched.

Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

“It is good that people support their friends and family, but lending them money can bring serious and unexpected problems. If repayments to a family member or friend are then missed, or more money is needed to make ends meet, debt can cause serious damage to their relationships as well.

“Lending money to help someone you care about is understandable, but if they are already in financial difficulty, more borrowing is not necessarily the answer and it can make things worse. People need to take practical action to solve the underlying debt problem and taking debt advice is vital.

“When someone is struggling with problem debt, they should get free, independent debt advice. StepChange Debt Charity exists to provide free, independent advice to anyone who needs it on 0800 138 1111 or visit our website for online debt help.”

Notes to editors:

1. Figures on ‘debts to family and friends’ from StepChange Debt Charity 2016 Statistics Mid-Yearbook, which will be released in September 2016.
2. In conjunction with YouGov, StepChange Debt Charity built a unique panel of 1,000 people who displayed between one and six objective signs of financial difficulty. These signs were identified in research conducted for StepChange Debt Charity by the Personal Finance Research at Bristol University. The following are considered to be signs of financial difficulty: making minimum repayments on credit commitments for three months or more; falling behind on essential bills, using credit to pay essential bills; using credit to keep up with credit commitments; using credit to make it through to payday; getting hit with overdraft or late payment charges on a regular basis. All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 1,000 adults showing signs of financial difficulty. Fieldwork was undertaken between 13th - 21st January 2016.  The survey was carried out online.