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Lenders keep it in the family

Lenders keep it in the family

Category: Loans

Updated: 14/12/2012
First Published: 17/08/2011

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 It is now over 6 months old so the content may be out of date.

Family have looked to each other to borrow money during the past few troubled years, shunning more traditional borrowing.

There has been a significant rise in the trend over recent years, with two thirds of people (63%) admitting that there has been an increase in family approaching relatives for money as a direct result of the credit crunch, according to Aviva.

The economic problems have seen many people turn to other methods of borrowing, which has seen an explosion in payday loan services which usually charge four figure rates of interest.

Although two thirds (61%) see it as a positive idea that families are able to turn to each other for financial aide as a first port of call, only 15% of families in the UK are currently lending money to each other on a more regular basis.

In a recent report by Aviva, it was found that people who were in debt to family members and friends owed them substantially more than other sources of borrowing such as overdrafts or store cards.

In fact, of retirees with this type of debt, those aged between 55 and 64 owe on average £2,100 to family and friends, with this figure increasing to £6,790 for those aged 65 to 74, although the majority of lending between family and friends is likely to be of smaller amounts.

When it comes to family, the recent findings suggest a staggering third of UK consumers would be willing to take out borrowing in their own names, for family members who are unable to obtain credit, possibly due to a lack of available credit lines, a problem often seen in retirement.

Figures suggest that you would be much wiser approaching a female relative for the highest chances of getting a loan and at the cheapest interest rate, if any interest charge at all.

In fact, the results quite clearly show that just 13% of women would charge their family interest on loans at bank rates or higher, compared to 40% of men.

However, the findings do show that men lend on average a third more (£2,643) than women (£2,076).

"The credit crunch has had an impact on all members of society; particularly it seems for those in retirement whose available credit lines may be limited," said Clive Bolton, at retirement director at Aviva.

"The implications of this seem to reflect a change in family dynamics from the late twentieth century when greater independence was achieved through the wider availability of credit, back to a time when the preservation of wealth and financial reliance was largely focused upon the family."

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