Borrowing from family and friends

It can be tempting to ask friends or relatives when you need to borrow some money. But you need to make sure you can stay MoneyFit, by  thinking carefully about what would happen if you can't afford to pay it back.

Try to avoid borrowing from (or lending to) your mates in the Forces. If it goes wrong it can create friction and undermine the trust you rely on.


Pros and cons of borrowing from family and friends

Borrowing from a family member can provide emergency money and help you avoid forms of borrowing with very high interest rates, such as payday loans or doorstep lending.

If both parties are certain it will not harm a relationship with a family member if you don't repay, this is a good option as it is normally interest free. If you're borrowing from a friend, be aware that if you don't repay, this could end the friendship.

Work out a budget first

If you do want to borrow from a family or a friend, make sure you draw up a budget beforehand, to see how much money you have left after paying your current living expenses.

As part of this, look at your current account and credit card statements from the last three months.

It's a good idea to get together your current account and credit card statements from the last three months (or longer to include one-off costs) before you do your budget. Use our Budget planner to get started, just input your figures and it will do the sums for you.

Money fitness tip

Whether you're borrowing money or lending it to someone it's always a good idea to start with doing your budget. That way you can work out how you're going to repay it or how you'll manage without the money you lend.

What if you can't afford to repay it?

It's always stressful if you can't afford repayments but it can be even worse if you're leaving a loved one out of pocket and it may harm the relationship.

That's why it's important to work out your budget and make a new repayment plan as soon as you find yourself in difficulties. Make sure you let them know what's happening as soon as possible.

Here are some other pages that will help you if you're struggling with debt: 

Alternative ways of borrowing money

If you aren't sure whether or not you should borrow from a friend or family member then there are other credit options, even if you have a poor credit rating. See Deciding on the best type of credit  to find out what they are.

What to consider before lending money

If a friend or family member asks for financial help, it can be really hard to refuse. But there's no point getting into difficulties yourself because you want to help or feel bad about saying no.

You also don't want to lose a good friend or fall out with a family member because of money.

So here are some important things to consider before lending any cash.

Can you afford it?

Take the time to work out your own budget before lending to anyone. Use our Budget planner to help assess your own finances.

Can they afford it?

Don't be embarrassed to encourage the would-be borrower to work out their budget as well. It will be less awkward to do so before you lend them money than once they find themselves in difficulties.

What will you do if the borrower can't pay?

You might be confident the person you've lent money to will be able to pay it back in full, but you still need to consider what you'll do if they can't.

This is a deeply personal decision but one you should think about before handing over any cash, no matter how sure you are that they will repay you.

How formal will the arrangement be?

It's a good idea to get something in writing when you're lending to family members. Be aware that if you lend money to family and friends regularly (and make a business out of it) you may need to be licensed by the Financial Conduct Authority (FCA).

Having a formal agreement in place can protect you. It's hard to think about but if the borrower died with the debt still outstanding, you'd need proof to claim from their estate.

Other sources

  • In exceptional circumstances, you might be able to get a short-term loan in the form of an Advance of pay  - see Advances of pay.
  • Check if there are any allowances you could be claiming to help your money go further - see Expenses and allowances.

Last reviewed: 15/03/2019

This content has been provided by the Money Advice Service