How to borrow money from family and friends

If you need money quickly, you may think about borrowing from a friend or family member to help. Doing so might come with its advantages, such as a generous amount of time to repay them or having no interest to pay back – but it can also have drawbacks.

Before borrowing from friends or family, you should take the time to carefully consider your options. Our guide on what to know before borrowing online might be a good place to start, as you might not want to risk damaging a close relationship unnecessarily.

Mixing money and personal relationships can lead to misunderstandings if expectations are not clear from the outset. Here, we share practical advice to help you borrow responsibly from friends or family.

In this guide:

• Tips on borrowing money from friends and family
• What to consider before borrowing from friends or family
• Creating a written loan agreement
• Pros and cons of borrowing from friends and family
• Other borrowing options to consider
• Should you borrow money from friends and family?

Tips on borrowing money from friends and family

Here’s a run down of the top five things to know before borrowing from friends and family:

1. Know how much money you need to borrow

Before asking for money, work out exactly how much you need and what it will be used for. Look at your income and outgoings carefully to calculate a realistic amount that will genuinely help you through a short-term financial difficulty.

Friends and family are often more comfortable lending money when they clearly understand why it’s needed and how it will be spent.

2. Work out a budget

Before borrowing, create a realistic budget that includes repayments to the person lending you the money. Review bank statements and household bills from the past three to six months to understand what you can afford to repay.

This step is particularly important when taking a loan from family, as missed repayments can quickly strain even the closest relationships.

 3. Plan your pitch

For most people, asking family or friends for money is a difficult, nerve-wracking task. Planning what you want to say in advance can help you explain your situation calmly and clearly.

Focus on why the money is necessary now, as well as showing a clear plan of action as to how you will pay the money back to them, to give you the best possible chance of receiving a positive response.

4. Explain the risks honestly

Always be open and honest with your friend or family member. If there is any potential uncertainty regarding when you will be able to pay the loan in full and you know this from the outset, you should make sure you explain this to the person in question properly, openly, and honestly. If your income is irregular or you’re unsure when you’ll be able to repay, explain this upfront.

5. Keep the lender updated

If you do choose to take a loan from a friend or family member, regular communication can help maintain trust. Monthly updates and keeping records of repayments can provide reassurance to both sides.

What to consider before borrowing from friends or family

Before borrowing informally, it’s worth stepping back and asking yourself a few important questions:

• Can I realistically repay this money without causing further financial strain?
• How would late or missed repayments affect our relationship?
• Is this a short-term solution or am I relying on ongoing support?
• Would a regulated option such as short-term loans be more appropriate for my situation?
• Have I explored options such as loan alternatives or budgeting support?

It’s also worth understanding how much money you can lend a family member in the UK. While there’s no legal limit on private lending, larger sums may require formal documentation and could have tax implications.

Creating a written loan agreement

Even when borrowing from someone you trust, putting the terms in writing can help prevent misunderstandings. A family loan agreement or loan agreement between friends doesn’t need to be complex, but it should clearly outline expectations.

Consider including:

• The total amount borrowed
• Repayment amounts and dates
• Whether interest will be charged
• What happens if a payment is missed
• Whether early repayment is allowed
• Signatures from both parties

Formalising a loan agreement between family members can feel awkward, but it helps protect everyone involved. Citizens Advice offers guidance on private loan agreements and their legal standing.

What if I can’t keep to the payment schedule?

If something happens that affects your ability to repay the loan as agreed, tell the lender as soon as possible. Early communication may make it easier to renegotiate the repayment plan, such as extending the term or reducing payments temporarily. While flexibility is often a benefit of borrowing from loved ones, it relies on openness and trust.

Pros and cons of borrowing from friends and family

Here are the pros and cons of borrowing from your friends and family:

Pros

• You’ll usually only repay what you borrowed – friends and family are less likely to charge you interest
• You’re likely to have more flexibility if your circumstances change
• No credit checks, which can help if you have a poor credit history

Cons

• Your relationship is at stake, especially if payments are missed
• It won’t help build your credit score
• The lender is at risk

Other borrowing options to consider

Borrowing from friends or family isn’t right for everyone. Regulated, responsible lenders must carry out affordability checks and provide clear repayment terms, which some people find reassuring. You may want to explore alternatives such as a payday loan or personal loan.

Should you borrow money from friends and family?

Ultimately, it comes down to how comfortable you feel about it. Borrowing from friends or family can be a helpful option during financial difficulty, but it should always be approached carefully. Clear communication, realistic budgeting and a written agreement can help protect both your finances and your relationships.

For more guidance on borrowing responsibly and improving financial wellbeing, explore the Moneyboat blog. If you need independent support, organisations such as StepChange, Citizens Advice, MoneyHelper and National Debtline offer free, confidential advice. You can also visit our third-party support page for more information.