Consumer debt levels have been widely reported over recent
months but until now little has been known about the UK’s
hidden debt – the money people have borrowed from their
family and friends and even their employers. However, new
research¹ from The MarketPlace at Bradford & Bingley,
reveals that over half of all UK adults either currently
owe or have previously borrowed money from their family,
friends, partner or employer.
The research, conducted by YouGov on behalf of The MarketPlace,
shows that 49% either currently owe or have previously borrowed
from their family; 18% from their friends; 14% from their
partner and 6% from their employer. 14% have borrowed between
£100 and £500 and 26% have borrowed more than
£500, 17% of whom have borrowed in excess of £1,000.
Surprisingly though, given the prevalence, only 5% are
happy asking family or friends to lend them money with 38%
admitting they hate it but sometimes find it necessary.
However, interestingly, paying them back isn’t high
on the pecking order with 50% more inclined to pay back
financial institutions such as banks or credit card companies
ahead of family or friends. Only 30% would repay friends
or family first.
Michael Senior, head of personal lending for The MarketPlace,
comments: “It appears that many people don’t like
asking for handouts, however, they don’t seem too eager
to pay their family or friends back. Of course it is vital
to keep up the repayments to financial institutions, but
being sluggish with the money you owe your loved ones could
cause unnecessary bad feeling. The best course of action
will depend on individual circumstances, but a potential
solution for some could be debt consolidation, thereby ensuring
all money owed is paid back with a sensible repayment schedule.”
Breaking the debt cycle
Three quarters (72%) said they had other forms of borrowing
such as credit cards, store cards, loans, overdrafts, hire
purchase agreements etc and a third (33%) said they were
worried about the amount of debt they had. Surprisingly,
however, only 6% think they should consolidate their debt
and have a set plan of paying it all off.
Senior continues: “One in ten people (12%) feel embarrassed
about talking about the amount of debt they have with family
and friends and a third are worried about their debt levels,
however, so few are actually prepared to do anything about
it. Wrapping borrowings together though, could be a solution
for many wanting a way out of their debt.”
There are three key ways of wrapping your debt together:
taking out a personal loan; transferring your balances to
a credit card offering a no or low interest rate balance
transfer deal; or remortgaging, if you are a homeowner*.
Which one to choose, however, will depend on your individual
circumstances and, crucially, how disciplined you expect
to be at paying the debt back.
But Senior warns: “Once you’ve consolidated your
debt, it’s vital to rein in those spending urges before
you arrive back at square one. Before making a final decision,
though, all the pros and cons need to be weighed up. For
the majority of borrowers who owe money to different financial
organisations, friends and relatives, consolidating debt
- if managed properly - will save you money and help keep
family harmony by ensuring you repay all the IOUs!”
For guidance, borrowers can contact The MarketPlace free
on 0800 11 33 33 (for loan enquiries call 0800 731 3232),
visit www.marketplace.co.uk or pop into any branch of Bradford
& Bingley.
