According to research, released today, by Aviva into the ‘secret statistics’ of lending between family members, two thirds of consumers (63%) say there has been an increase in family approaching relatives for money as a direct result of the credit crunch.
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.
Although somewhat contradictory in sentiment, this may allude to the fact that finances remain a taboo subject, and although the trend of inter-family lending is increasing, encouragingly, consumers may be seeking professional advice first from organisations such as the Citizens Advice Bureau.
In its recent Real Retirement Report, Aviva 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.
Although two thirds believe that lending money to each other in the family in the wake of the credit crunch is a good thing, it does seem that it depends who you approach as to what deal you will get!
The findings from Aviva 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).
Clive Bolton, ‘at retirement’ director at Aviva, commented: “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. 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.
“However, it is crucial that consumers in financial difficulty seek the right professional advice, in addition to that of their families, to ensure they are aware of all options available to them when making important decisions about their long term financial security.”
