“It’s all right — she’s family.”

“He’s a mate. I’ve known him for years. There’s no way he would turn me over.”

WRONG.

Being family or a lifelong friend does not guarantee that someone will repay money you lend them. Yet that relationship is often the very reason people hand over their savings without a written agreement or even a clear repayment date.

“Lending money to family and friends: saying no is the hardest part”

You want to help, and refusing can make you feel guilty or unpopular. You may even feel that asking for a written agreement will be taken as an insult.

So you say yes, despite your doubts, because saying no feels too difficult.

When the money fails to come back, you are left chasing someone you trusted — and wondering whether you will lose both your money and the relationship.

Over the years, we have received so many unsolicited calls from people who have lent money to family or friends. Some are in despair; others are boiling with anger. But they all say the same thing:

“I cannot believe they would do this to me.”

By then, the problem often goes well beyond the unpaid loan. Family members or mutual friends are taking sides, arguments are spreading, and what began as an act of kindness has become deeply distressing.

£25,000 — his entire savings

One of the worst calls we received was from a very elderly gentleman who told us he had lent his niece £25,000 — his entire savings. She had promised faithfully that he would be repaid in full when a property was sold.

According to him, the property was sold, but his money was never returned.

He had nothing in writing. WhatsApp and other messaging apps were alien to him, so no messages were recorded about the loan or her promise to repay it.

He had contacted the police. He told us his niece claimed the money was a gift, linked to an expectation of certain favours, and that he wanted it back because those favours had not materialised. The police said it was a civil matter. So not only was he facing losing his life savings, but his reputation was being tarnished at the same time.

He called us as a last resort, hoping we could somehow recover his savings.

Sadly, based on the information he provided and the lack of supporting evidence, we considered the prospects of recovery very low. We were therefore unable to deal with the matter on a No Recovery – No Fee basis.

We advised him to contact solicitors and explained that the potential costs of taking the matter to court could be substantial. He said he had nothing left, so that was not an option for him.

He had trusted a member of his own family with everything he had. Now his side of the family was at war with hers, and, in our opinion, there was little prospect of him ever recovering his life savings.

“I’m only signing to help them out”

Another situation is acting as a guarantor. So many people sign because they want to help a family member or friend obtain a loan or car finance.

“They’ll make the payments. My signature is just a formality.”

Then the payments stop. The loan falls into default, or the car is repossessed, and the finance company turns to the guarantor for payment.

Suddenly, the person who thought they were simply helping out faces a demand for thousands and may be legally responsible for paying it.

Signing as a guarantor is a financial commitment. Before signing, understand exactly what you could be required to pay, how long the guarantee lasts and whether you could afford it if the borrower stopped paying.

“Family loans: put the agreement in writing”

We are not talking about lending a small amount that would annoy you if it were never repaid, but would not change your life.

We are talking about money you cannot afford to lose. Before handing it over, insist on a signed agreement stating clearly that the money is a loan, how much is being borrowed, what it is for, and when and how it must be repaid.

A signed agreement cannot guarantee that you will get your money back, but it records what both parties agreed.

If the person asking for your money objects to that formality, stop and have a long, hard think about what you are getting involved in.

They are asking you to trust them with your money. Why are they unwilling to put their promise to repay it in writing?

“For further guidance, see MoneyHelper’s advice on lending money to family and friends.”

NPD Comment

“Over the years, our work in debt recovery has shown us how quickly an unpaid debt can destroy trust.”

The hardest word to say in these situations is NO. From our experience, lending money to family or friends can bring out the absolute worst in people. Promises are denied, accusations are made, and other family members or friends are drawn into taking sides.

Can I recover a loan if there is no written agreement?

Yes, potentially. WhatsApp messages, emails, texts and other evidence can help establish that the money was a loan and that repayment was agreed.

But remember: it is for you to prove that the debt is owed. It is not for the borrower to prove that the debt is not owed.

What if repayment was promised when a property was sold?

The borrower’s promise does not, by itself, oblige the solicitor handling the sale to pay you. The solicitor may have no knowledge of you or the loan.

Unless your loan is protected by an appropriate registered charge or the solicitor has given a binding undertaking to repay you from the sale proceeds, do not assume your money will be paid back on completion.