Personal loans to friends don't work, finance site warns

29 June 2007
Becoming a personal lender to a friend is something many Britons feel obliged to do as a sign of friendship, a study from CreditExpert.co.uk has revealed.

Two in five Britons said they would lend "as much as they could afford", despite the fact that a change in their own circumstances could mean they are soon unable to afford such generosity.

As many as 47 per cent of Londoners were ready to take on a financial burden for a friend in financial trouble, the research revealed.

But the debt advice site warns that, while generosity can help friends avoid seeking loans from other sources, it can also tip the lender over into debt themselves, damaging their credit rating.

"It doesn't always pay to be generous", commented CreditExpert.co.uk's managing director Jim Hodgkins.

Financial 'etiquette expert' Liz Brewer, commenting on the research, suggested that advice to a friend is better than lending money, although other financial analysts might add that professional financial advice from a qualified individual is best of all.

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