More people ditching Buy Now Pay Later loans in favour of family help

A new survey has suggested that people are turning to family and friends more often for money than Buy Now Pay Later loans, and for many it costs less than £250.

The survey of more than 4,000 adults, commissioned by not-for-profit Fair4All Finance and shared exclusively with the BBC, found that 25% of respondents had taken out a Buy Now Pay Later loan this year, with 26% borrowing from family and 15% from friends.

Many relied on friends and relatives because they were rejected by traditional services such as banks; However, some of these loans still come with interest.

For 42-year-old Carla McLoughlin, borrowing small amounts from her mother is a big deal.

The mother of three says the money is needed “to tide us over for a week or two until we get paid.”

But some people said borrowing money from their nearest and dearest affected those relationships.

9 per cent of those who borrowed from family said it weakened the relationship, and this figure rises to 17 per cent when borrowing from friends, with different repayment expectations souring relationships.

The dynamics become even trickier for many people, with 16% of people who borrowed from friends and 8% of people who borrowed from family saying they were charged interest.

Carla’s mother, Val Lucus, 63, said she lent money to other family members who did not repay her.

“You’re always after him. It can be difficult,” he said.

Fair4All Finance was established by the government in 2019 and has been running campaigns to make financial products available to a wider group of people.

The research was carried out in collaboration with polling company Ipsos and included people from England, Scotland and Wales.

It found that young adults, households with children and people on zero-hours contracts or in low-paid jobs were most likely to borrow from friends and family.

The research also showed a quarter of households could not afford a £500 emergency bill without borrowing.

But for Carla and her mother Val, cash doesn’t flow in one direction. They live nearby on Merseyside and regularly have to borrow money from each other.

“We do this all the time. If I need £50 to get a few bits and pieces to tide me over,” said Carla.

“He’ll be short in two weeks, so I’m giving him back, and if he needs a little more, I’ll give it to him.”

Carla had been rejected for a loan in the past and struggled to get a phone contract, so Val was happy to help.

Carla had also seen her mother pawn her grandmother’s rings in the past.

“Mom, why didn’t you ask me?” I burst into tears. He said that he wanted to help his mother as much as he could, and that he had paid his mother’s natural gas and electricity bills in the past.

The couple said that this did not affect their relationship and that they never took interest from each other, but they saw things go wrong for others.

“Some people say they’ll give you a refund, but then they don’t. Then they screw it up themselves,” Carla added.

Many people turn to family and friends because they have been rejected by banks, credit cards or Buy Now Pay Later services.

For others, avoiding overdraft fees or high-interest short-term loans may be a cheaper option.

Kate Pender, boss of Fair4All Finance, said it was important for everyone to have access to credit for those unexpected moments in life.

“No one should have to put their closest relationships at risk just to cover basic expenses. We urgently need to expand access to safe, affordable credit so people are not forced into difficult choices,” he said.

4 percent of respondents have used a loan shark or unregistered lender in the last 12 months.

This figure may be even higher, because some of those who thought they were borrowing from a “friend” may actually have borrowed from a loan shark, a person who lends money to multiple people, charges high interest, and often uses intimidation to get repayment.

Dave Benbow, chief executive of the UK Illegal Money Lending Team, known as Stop Loan Sharks, said around half of the people the organization supports believe the loan shark is a friend at the time of borrowing.

“We often see situations where additional expenses are suddenly added, spiraling into debt and borrowers find themselves trapped,” he said.

Money AssistantAn independent website backed by the government says it’s important to think carefully before borrowing money from a family member or friend. If you have trouble paying off your debt, this can put pressure on you and your relationship.

They recommend good forward planning, and a written agreement can be helpful whether you’re the borrower or the lender.

• Be completely honest with yourself about whether you can afford to loan the money if it has never been repaid.

• If you feel pressured or awkward, say no. There are safe borrowing options, such as Credit Unions, to which you can refer a loved one.

• Keep a written record (an email, text or Whatsapp may be sufficient) stating how much credit you gave and when you would like to receive a refund.

• Offer to help in another way; perhaps pay a bill directly for someone in need.

• Encourage the person to seek help from a lender. Help them fix their finances, don’t keep bailing people out.