Informal loans 'unlikely' to be paid back

People in the UK hand out an average of £2,250 in informal loans, which they are unlikely to ever receive back, a survey has shown.

Research by OnePoll showed that 40% of people who borrowed money off a friend or relative would not be able to repay it, with 24% admitting they would never pay it back.

A third of informal lenders said the loan had caused irreconcilable problems, with 70% saying they should have drawn up a contract beforehand to avoid the disputes.

A popular reason for borrowing money in this manner is having a lack of savings, with 31% of people saying the cash because they had failed to make provisions of their own. Meanwhile 22% of borrowers said they could not get an official loan from a financial provider and that is why they had to do it informally.

But nearly a quarter said they needed the money because their income did not cover their living costs, with many needing the cash to pay for food or rent, while 12% used it to pay off existing debt.

A third of parents said they had dipped into their savings to lend money to their children, while 12% said they had taken out a loan themselves in order to help out their offspring and 8% had run up credit card debt.

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