If you’re on a debt solution with us, get in touch with us before borrowing money off a loved one. It might be possible to reduce your payments to your debts temporarily to cover any emergency expenses.
No one wants to fall out with someone they care about over money.
Back in September 2016, our research showed how debt can damage relationships. Sometimes the person lending the money is struggling too.
This added pressure could result in the person lending the money blaming the borrower for their difficulties, which can damage relationships.
With this in mind, let’s look at the alternatives to borrowing money from your loved ones.
What are my alternatives to borrowing from family or friends?
Before you consider borrowing money from a loved one, it’s worth looking at other options first. These include:
- Taking out a credit union loan. Credit unions are popular alternatives to high street banks for small loans. Having a poor credit rating is usually less of an issue when borrowing from a credit union, and some can take affordable loan payments direct from your wages. Some can also help with affordable credit to buy appliances or other household essentials. They’re much cheaper than payday lenders or rent-to-own stores.
- Asking your employer for a wage advance. Depending on where you work, your employer may pay you an advance on next month’s wages.
You’ll likely have to put forward a strong reason to get this advance, as employers don’t like to make a habit of paying wages out early. You also need a plan to make sure your wage lasts the extra time until the next payday.
- Consider selling stuff you no longer need. Is there anything you could sell on eBay or similar sites? Bear in mind that this can be time-consuming and might not be helpful if you need money quickly.
- If you’re on a very low income and dealing with an emergency, you may be able to get help from the Jobcentre Plus or your local authority. There may also be a food bank in your area to help with essentials.
I need to borrow money from my family or friend – what can I do?
If borrowing from your family or a friend is the only option, we highly recommended that:
- You’re honest about what’s going on: If you’re dealing with debt, tell them. For example, if you’re paying off a bailiff or need to clear electric arrears, tell them. Being honest about why you need the money shows that you have trust and respect for your loved one. Sharing your worries can help ease some of the stress you’re dealing with.
- You set their expectations: When borrowing money from family or friends, there’s sometimes a tendency to give absolutes on when the money will be paid back (e.g. “I will DEFINITELY get the money to you when I get paid next week, PROMISE”). If you’re confident that you can pay this money back in the timeframe, that’s fine. If you’re unsure, it’s not worth making promises you may not be able to keep. Tell the person you will pay them back as soon as possible.
- Don’t get involved with a loan shark. Even if they seem friendly or were recommended by someone you know, avoid borrowing from an unlicensed lender or ‘loan shark’. This can be difficult to get out of. If the person you plan to borrow from lends money to other people or charges interest, what they’re doing may be illegal.
I can’t pay my family or friend back – what can I do?
If you’ve borrowed money from a family member or friend and you can’t afford to pay them back, don’t ignore them. If you stop seeing your family or a friend without telling them what’s going on, they may just assume you have no intention of paying them back at all.
Instead, tell them why you can’t afford to pay them back. Be honest. Explain what you have coming in and what essential costs you need to pay, or if you have one, show them a copy of your household budget. That way, they can see why you can’t pay them back faster.
Whatever you do, make sure that you’re sensitive to the fact you owe your family or a friend money. I’ve lost count of the amount of times I’ve heard people gripe about seeing someone who owes them money sticking up photos of wild nights out or other treats on Facebook.
No one’s saying you’re not entitled to have fun, but being aware of how that may come across to people you care about can save you a lot of awkward conversations.
I’m owed money by my family or friend! What can I do?
It’s not uncommon to find yourself in difficulty because you’ve lent money to someone who hasn’t paid you back. If this has happened to you, try:
Giving the person a gentle reminder
If your loved one hasn’t paid you back yet, don’t automatically assume the worst. If they’re dealing with a wider problem such as divorce, illness or large amounts of debt, this could be causing them lots of worry. It could just be that they’ve forgotten they owe you money!
Try sending a gentle reminder to your friend. Something like this may work:
Hi ___________, hope all’s well! I know things are a bit tough for you at the moment, but I was just wondering when you reckon you’ll get chance to pay back that money I lent to you?
Employing tact in a situation like this can really help. People with debt problems can often feel overwhelmed or attacked, and a common reaction to that is to bury their head in the sand. A gentle approach means they’re less likely to avoid you.
Suggesting a payment plan
If your friend wants to pay you back but can’t pay all of the money at once, try suggesting a payment plan.
Paying you off in one go might put your loved one back to square one, which means they need to borrow money again very soon. Putting an affordable payment plan in place means that they can pay the debt back without getting into further difficulty.
Sit down with them and work out how often they’ll pay and how much, making sure it’s affordable for them, so they can stick to the plan.
Looking for ways to help them with their budget
Helping your loved one with their finances may be one of the best things you ever do for them. If they struggle with managing money there are a host of websites and apps that can help them budget. They could look into switching utilities or to a cheaper phone tariff. If they need debt advice, encourage them to get debt help.
Considering the alternatives
If your friend isn’t able to pay you back with money, how about payment in kind?
If you’ve come to the conclusion that you’re not realistically going to get your money back, agreeing some payment in kind can diffuse an awkward situation. You get something useful, and your friend isn’t made to feel they’re a ‘charity case’ or like they’ve ripped you off.
There are a few things to avoid if someone owes you money. Don’t:
- Add extra money or “interest” to their debt
- Tell other people about the debt
- Lose your temper or use threatening language
These are more likely to make the other person avoid you, and you could even be breaking the law.
I’m in debt but a loved one wants to borrow money from me
If you have debts you’re struggling with, it’s highly unlikely you’re in a position to help your loved one, as much as you may want to. Kindly but firmly tell them no. Tell them of the alternatives, and suggest they get some free and confidential debt advice.