Borrowing from someone you know can be cheaper than any loan. It works best when both sides treat it like a real agreement.
Need to know
- A loan from family or friends is often interest-free, but it still needs clear terms.
- Write down the amount, the repayment plan and what happens if a payment is late.
- Only borrow an amount you can realistically repay, and only from someone who can afford to lend it.
- If you’re borrowing regularly to get by, free debt advice may help more than another loan.
When money is tight, asking someone close to you for help can feel easier than applying for credit. It can also put strain on a relationship if expectations aren’t clear.
Before you ask
- Work out exactly how much you need and why.
- Check you could repay it from your regular income.
- Think about whether the person can afford to lend it without hardship.
- Consider other options, such as a credit union loan or help from your council.
Agree the terms
| Detail to agree | Example |
|---|---|
| Amount | £250 |
| Repayment | £50 a month from the 1st of next month |
| Method | Standing order |
| Interest | None |
| If a payment is late | Tell them in advance and agree a new date |
Writing these down and both signing a short note keeps things clear. A standing order means repayments happen automatically, so nobody has to ask.
Helpful step
Treat the repayment like any other bill. Setting up a standing order on payday shows you’re taking the arrangement seriously.
Protecting the relationship
- Keep the person updated if your situation changes.
- Don’t borrow again until the first loan is repaid.
- If they lent you money for something specific, use it for that.
Important
Never borrow from someone offering informal loans who isn’t authorised by the Financial Conduct Authority. Illegal money lenders, or loan sharks, can charge huge amounts and use intimidation. Report them to your local illegal money lending team.
When to look for other help
If you’re borrowing from people you know to cover everyday costs, the gap is likely to come back next month. Free debt advice from MoneyHelper, StepChange, National Debtline or Citizens Advice can help with a longer-term plan. Our guide to alternatives to payday loans lists other options to consider.
Your questions answered
Do we need a formal contract?
Not necessarily, but a simple signed note of the amount and repayment plan helps avoid misunderstandings later.
Is it a gift or a loan?
Agree this clearly at the start. It matters for the relationship, and a gift can have tax implications for larger amounts, such as Inheritance Tax rules.
What if I can’t repay on time?
Tell them before the payment is due and suggest a new plan. Silence usually does more damage than a late payment.
This guide is general information, not financial advice. Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk. We don’t arrange loans or work with lenders. Before borrowing, check the lender is authorised on the FCA register, and consider free debt advice from MoneyHelper, StepChange, National Debtline or Citizens Advice.