Owing money to friends and family is often considered as one of the worst feelings in the world. It’s hard to look someone in the face when you know you owe them money and have yet to repay them. However, thousands of people rely on friends and family every year to survive financially.
A recent report from Aviva suggests people in debt are borrowing over £1,500 on average from friends and family to deal with their debt. This has doubled in only 3 months!
There are reasons why people may be borrowing money from friends and family, such as the average household income has dropped, the available disposable income of a family has dropped too and the savings a family once had have diminished.
But, are people borrowing money from their friends and family because they are short of cash at the end of the month? Or is it because they have a fundamental debt problem which needs professional help? Debt and money problems have the ability to ruin families, so should you borrow money from friends and family?
Family Support vs Dealing with the Problem
Yes and No. Not very definitive is it? Well, let me explain. It depends on the circumstances around which the money is being borrowed. Yes, we can all run a little short on cash by the end of the month and we don’t have a serious money problem; granted budgeting better would help!
However, when you’re borrowing money from friends and family because of a debt problem, i’d always say don’t do it!!
There are two options: Denial or Acceptance.
I rarely borrowed money off friends and family because it made me feel terrible. I asked a few times for support but realised my request was putting people in a difficult personal and financial situation too. I was in denial about the severity of the problem.
Eventually, after one year of realising I was holding back from the inevitable I accepted the problem and sought help from a debt advice charity.
In different circumstances, friends and family are the right route. For example, if your wages are late being paid then friends and family can be a great support and there is no risk for your nearest and dearest.
If you owe £30,000 in unsecured credit cards, overdrafts and store cards and you’re borrowing money from friends and family to help you ”rob Peter to pay Paul”, then it’s time to look in the mirror. These people, as harsh as it sounds, will drag their friends and family into their financial problems and leave them poor! Stop it and take a look at the real problem? Is the issue that you can’t meet your contractual payments to your debt for this month, or is the problem that there’s not enough money left over to pay for rent/ mortgage, food, clothes and your contractual debt payments EVERY month.
Often people state “the interest on the debt just became too much”. True, the interest payments will be what make you realise you are getting nowhere fast and you are “treading water”. However, the problem started months and months before this, but denial meant you couldn’t see it.
The light at the end of the tunnel is seeking professional debt advice.
How Friends and Family Are Considered In a Debt Solution?
Do you consider your friends and family different from your creditors (i.e. the companies you owe money too?). Friends and family are people you meet at parties, family gatherings, in the supermarket etc, where as creditors stay behind a telephone or a desk, usually.
In terms of when you eventually deal with your debt, either through a Trust Deed, Bankruptcy, IVA or another debt solution, you will be required to consider your friends and family the same as your creditors.
So, your family and friends have lent you £5,000 and you’ve borrowed £20,000 from credit card companies and your bank. If you entered a debt solution which meant you would not pay back all of the money, then your friends / family and creditors would not get back all of their money. You can’t repay more money to your friends and family than your creditors, just because you like your friends and family more.
This puts a lot of people in a predicament.
Do I enter a debt solution where I can be debt free in 5 years under and IVA but my friends and family won’t get back all of their money? Or should I try to keep paying my debt so my friends and family can get back their money but over 20 years?
Problems in Borrowing Money
If you haven’t borrowed money from your friends and family yet but you have a serious debt problem, then I’d advise you not to ask them. It always gets messy. Accept the problem is not this one payment to your credit card but the whole debt and get professional debt advice from a debt help charity. There are plenty out there happy to help you.
Families and friends don’t usually fight but when they do it’s usually because of money problems. You don’t know the financial situation your friends and family are in as rarely do people talk about their finances openly. In the UK it’s almost considered taboo to tell people how much you earn or the savings you have in your bank. Your friends and family could be struggling financially but feel obliged to help you, which in turns puts them in a more difficult financial position.
I’ve been there when the wolf (or bailiff) is at the door demanding money “or you’ll be taken to court”. Well my response was, “I don’t have anything, so I’ll see you in court”. A bailiff can’t break into your property and if a bailiff has a warrant to enter your property to take a list of the goods you own they can’t take work tools, household items like a sofa or fridge and they can’t try and sell clothes etc. A bailiff is allowed to take your car and sell it.
At the end of the day the bailiff didn’t do anything when I told him I had nothing. He went away and didn’t bother any longer because he knew I had nothing. Friends and family will eventually lose patience in lending you money. You’ll have damaged your relationships and still be in debt. Please deal with the fundamental root cause of the problem and seek professional debt advice support today.