10 Facts About Loaning Money to Friends/ Family Members (Based on Statistics)

Last Updated on 2022-07-28 , 6:12 pm

Unless your middle name’s Miser, like literally (sorry my friend Richard Miser Fetterton), you would probably have loaned money before, whether it’s to your acquaintances, bosses, random people you see on the street, or friends & family.

But did you know something?

Loaning money to your friends or family members, contrary to popular beliefs, might not actually grant a 100% return rate. In fact, it might not even be close.

Yeah I know; incredulous, isn’t it? Your friends and family, as the people closest to you, are actually more than capable of chewing, violating and trodding on your hard-earned money. Oh the blasphemy.

But how did I arrive at this conclusion? Is it but pure bias on my part, because my parents escaped with the $10K I so kindly lent them?

Well, read on to find out more!

1. Family members aren’t the most efficient debt repayers

So DebtSmart Online did an interview with respondents, where they posed questions about the whole loaning and returning of money. And well, let’s just say that the results weren’t the most… predictable, for lack of a better word.

Anyway, their survey(s) states as follows:

Have you ever lent money to a family member?

• 70.27% of respondents said Yes
• 27.03% of respondents said No
• 2.7% of respondents said Not Answering

If yes, did they pay you back?

• 37.84% of respondents said Yes
• 8.1% of respondents said Partially
• 24.32% of respondents said No

Would you ever (or ever again) lend money to a family member?

• 59.46% of respondents said Yes
• 27.03% of respondents said No

So yeah, folks. Out of 70.27%, 32.42% never actually got their money back. That’s nearly half, for your information. Although of course, we’re not sure whether it’s because of dysfunctional families or whatnot. Then again I highly doubt that all 32.42% would be families straight out of Courage, The Cowardly Dog.

Also, to the 27.03% of respondents that will never lend money to a family member ever again… kudos?

2. Close friends aren’t any better

Have you ever lent money to a close friend?

• 59.46% of respondents said Yes
• 37.84% of respondents said No

If yes, did they pay you back?

• 27.02% of respondents said Yes
• 18.91% of respondents said Partially
• 13.51% of respondents said No

Would you ever (or ever again) lend money to a close friend?

• 37.84% of respondents said Yes
• 32.4% of respondents said No

So this time around, 32.42% of 59.46% did not actually return the money they owed, which is nothing less than sheer blasphemy considering how they’re supposed to be close friends.

Also, 32.4% of 70.24% opt never to lend money to their close friends (again).

But is it so much of a choice or an obligation though? I mean, assuming that he or she’s stuck out a club with no pocket change to go, and you’re the only one who can help them out…

Just saying that the bouncer ain’t gonna lend some change… you get my drift… right?

3. Blood is thicker than water

So if you observed from the prior points, lending to family members has actually worked out better as compared to lending close friends.

Guess your close friends really aren’t that close, huh? Haha, I kid, I kid.

But as it turns out, it’s reached a point where…

4. Lent to family or friends? Oh sweet, guess I gotta wrap it up

So DebtSmart asked its respondents this:

When you lend money to friends or family do you expect repayment, or is it better to think of it as a gift?

And surveyees answered as follows:

• 51.35% of respondents said Gift
• 43.24% of respondents said Repayment

That’s it, guys. 51.35% of 94.59% have actually given up on repayment, and choose to view it as a gift. Minus the wrapping apparently.

Or maybe it’s simply cos they view their family members as indispensable, and as such choose to treat loans as gifts because they don’t wish to quarrel over financial issues and whatnot. But whichever the case is, it still speaks volumes when more than half treat it as a gift you know.

Christmas every day?

5. Does it help if there’s a third party involved?

I understand; it could kind of get awkward if you have to consistently approach your mum and go “Hey, Mum, can you return that $5K I owe you already? You promised to return me when I was 20 and I’m like going to the hospital to see my grandchild Bryan soon.”

As such, DebtSmart wondered whether a third party would actually ease things, in the sense that you will now have someone to collect the money, charge a small fee and send you the payment. In short, it’s like a personal bank teller of sorts.

Unsurprisingly, people weren’t convinced.

The exact questions go like this:

Would you be more likely to lend money to a family member and/or close friend if a third party were managing the repayment of the loan? The third party would send out the bills, collect the money, charge a small fee, and send you the payment?

• 62.16% of respondents said No
• 27.03% of respondents said Don’t Know
• 10.81% of respondents said Yes

It does intrigue me that 37.84% would actually entertain the notion of a personal bank teller though.

6. Would you actually consider charging your friends & family interest?

By this point, we’re heading full-throttle towards bank territory, with actual interest being added to the play.

Although it does get you thinking; would you ever consider charging your own family and close friends interest?

Is it fair to charge a reasonable interest fee when lending money to family member or close friends?

• 48.65% of respondents said Yes
• 37.84% of respondents said No
• 13.51% of respondents said Don’t Know

So… it seems that a whopping 48.65% wouldn’t hesitate charging a reasonable interest fee when it comes to their family member or close friends. Is it just me or am I beginning to see a real pattern forming right now?

What rate is a “reasonable” rate to charge family and friends?

• 24.32% of respondents said 0%
• 13.51% of respondents said 2%
• 8.1% of respondents said 4%
• 21.62% of respondents said 6%
• 10.81% of respondents said 8%
• 21.62% of respondents said Don’t Know

If you think about it, 6% (the tied-second most voted option) is still lower than the local GST rate, so yeah. Although it does take the pick up line ‘Are you a bank? Because you’ve got my interest’ to a whole new level.

7. Would YOU return money on time?

But of course, we can’t possibly dish out all the flak without spilling some of it on ourselves.

As such, do you make it a point to return money on time?

Again, DebtSmart asked the same set of respondents a series of question, but instead of querying them about their toxic family members & friends, the Russian roulette is directed at them this time.

Have you ever borrowed money from a family member?

• 81.08% of respondents said Yes
• 16.22% of respondents said No

I find myself highly doubting the credibility of the 16.22%.

If yes, did you pay them back in full? If not, why?

• 64.86% of respondents said Yes
• 8.1% of respondents said Partially
• 5.4% of respondents said No
• 21.62% of respondents said n/a

Hmm… I see two scenarios with this one:

• The personnel DebtSmart rounded up happen to be pretty family-oriented people with good moral and credible values.
• They are lying straight through their teeth… if they still have it.

Would you ever (or ever again) borrow money from a family member?

• 51.35% of respondents said Yes
• 29.73% of respondents said No
• 18.91% of respondents said Don’t Know

So, with family members all done and dusted… how about close friends?

Have you ever borrowed money from a close friend?

• 56.76% of respondents said No
• 37.84% of respondents said Yes
• 5.4% of respondents said Not Answering

56.76% of the personnel interviewed didn’t borrow money from close friends before.

Probably aren’t close friends in the first place. Just kidding. Not.

If yes, did you pay them back in full? If not, why?

• 62.16% of respondents said n/a
• 37.83% of respondents said Yes

Well, at least someone, or in this case some people, are honest about it.

8. A different source

As our history teachers used to teach us in class, don’t determine whether it’s true or false based on a single source.

And as much as I hate to pay respects to my old history teacher, I gotta say he’s right for once. Judging based on a single source is akin to nursing a baby cockroach on your bed and letting it grow beside you while you sleep and allowing it to slowly creep into your ear… yeah you get the point.

As such, I have opted to use CNBC as my relative source, and surprise surprise, the answers are pretty much the same.

According to a new study by LendingTree, people who lend to their relatives normally end up getting just 57 percent back.

The average amount recorded across all generations for people who have loaned money in their adult life is $5,022, and of that, an average of $2,857 has been repaid.

9. Debt Payback

Incidentally, there’s also a detailed chart on debt payback, courtesy of American lending and borrowing customs.

Generation X has the best record for borrowing and repaying, with 75.5% of the total sum repaid, while Millenials scored the worst in that aspect, with a paltry 54.9% repaid.

At the other end of the spectrum where we compare the total loaned versus total repaid, the Millenials top the list with 64.3% of the total loaned amount paid back, while Generation X is bottom of the barrel with a paltry 52.3%.

Broken Down Analogy: Generation X individuals have a tendency to take the money and return it, while Millenials are less likely to do so. As a result, however, Generation X find it harder to get their money back (no thanks to Millenials and Baby Boomers) while Millenials find it easier to reclaim money (no thanks to the courtesy of Generation X, and Baby Boomers).

10. Cause and Effect

However, as it turns out, borrowing and lending money within the family tree could actually cause adverse effects.

With hurt feelings being the top most common effect, it’s no wonder 25.9% of the population said they will never loan money to family members again.

At the end of the line

It would appear that though they’re your family members & close friends, their return tendencies aren’t anywhere close to the strength of your bonds.

Although another possible reason would be that only dysfunctional families were brought in for the study, let’s face it…

What’re the chances?

Anyway, do you feel the same way as the majority of the respondents on this page, or are you part of the minority (?) Tell us what you think in the comments section, and also tag those friends and family who cause you to think that way! 😉

Featured Image: i viewfinder / Shutterstock.com