Americans are borrowing more from their families and friends. At the same time, this trend is supplanting the use of favorable, traditional loan alternatives. Mum of three Carla McLoughlin, 42, from Merseyside. She constantly has to borrow money from her mom, Val, illustrating this change in family economic conditions. This pressure on family support underscores a broader societal issue of financial insecurity and lack of access to credit.
Because she’s struggled to get loans in the past, she’s relied heavily on her mother’s help. She often borrows small amounts, typically around £50, to “tide her over for a week or two until she gets paid.” This destructive cycle of debt isn’t just about individual behavior. It underscores an alarming trend, with 26% of those surveyed saying they have taken out loans from family and 15% borrowing money from friends.
It’s largely made possible by the close relationship between Carla and Val. Since they live within close proximity, they often borrow from each other when needed, lending frequently back and forth. Val has helped other relatives as well, though not all of these loans have been repaid. “We do it all the time. If I need £50 just to get a few bits to tide me over,” Carla stated, underscoring the regularity of these transactions.
Carla expressed, “Some people say they’ll pay you back but then they don’t. Then they’re messing it up for themselves,” indicating the potential strain that financial transactions can place on familial bonds.
Carla’s mother, Val Lucus, has faced the same difficulties when she’s lent money. “You’re constantly chasing it up. That can be difficult,” she explained, revealing the emotional toll of financial support within families.
Younger adults, households with children and those in less stable occupations are particularly affected. This trend is exacerbated for those on zero-hour contracts and in lower-paid work. Shockingly, one in four households surveyed personally conceded they could not cover a £500 unexpected expense. They claimed they wouldn’t be able to pay for expenses without borrowing money.
Increasing dependence on informal, non-market lending sources in some countries has led to questions about the ethics of such arrangements. Our borrowers have told us that money matters with friends can be a friendship ender. In reality, 17% of borrowers from friends said it damaged their relationships. In the same vein, 9% of those who borrowed from family experienced the same adverse effects.
The need for informal lending can often lead people to even more dangerous options. Even the neediest – the folk from whom 4% said they had turned to loan sharks or unlicensed lenders in the last year – must be avoided. This trend has led many in the field to advocate for smarter, more sustainable financing solutions. Kate Pender from a financial advocacy group emphasized the need for safer credit options: “We urgently need to expand access to safe, affordable credit so people aren’t forced into difficult choices.”
This circumstance speaks to a deep societal mission. Traditional lending is still inaccessible to too many, pushing families like Carla and Val to rely on one another’s friendship to cover their household expenses. “No one should have to risk their closest relationships just to cover essential costs,” Pender added.
