More than £7bn borrowed from ‘Bank of Friends’ - Loans - News - Moneyfacts

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More than £7bn borrowed from ‘Bank of Friends’

More than £7bn borrowed from ‘Bank of Friends’

Category: Loans

Updated: 28/10/2010
First Published: 28/10/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The harsh economic climate has forced people to turn to their friends to borrow money, with over £7 billion given out in the last year.

Rather than turning to their bank for a loan, the recession has caused a new type of lending to emerge, as people have turned to the 'Bank of Friends' in their droves in a bid to boost their battered bank balances.

Loans to the tune of more than £7 billion have been okayed by friends over the last 12 months, research from the Post Office shows. More than a quarter (26%) of people claim to have lent their friends money in the last year, with the average lender reaching out to four friends at an average of £133 a time.

In a move unlikely to be replicated by the UK's financial institutions, 18% of lenders have lent more than they can afford, while 19% said they can't remember the value of the loan they gave out. However, having to chase payments is not limited to banks, as just under £3 billion remains unpaid.

Those struggling to repay their friends have come up with a number of imaginative ways to clear their debts. The top alternative ways to pay back a financial favour are alcohol, a favour in return, a thank you kiss or a hug, a meal out and a thank you card. While these repayment methods may find favour amongst friends, it is unlikely that your local bank branch manager will be so accommodating!

"Understandably, millions of households across the UK have needed to tighten their purse strings as the recession has taken its toll, and with money hard to come by from many lenders, people can be thankful that they have such good friends they can rely on," said Doug Strachan, director of financial services at the Post Office.

"Not only does this research show another side effect caused by the recession, but it highlights how people want to help others, outside of their immediate families, through tough times."

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