Just 15% of People Think Lending Money to Family Members is a Good Idea [Survey]

Modern life is expensive, and many are feeling the financial pinch. As the cost of living continues to rise and salaries lag behind inflation, people are taking drastic measures like early withdrawals from retirement accounts to keep themselves afloat.

One of those measures can be borrowing money from family members, which offers unique benefits and drawbacks. On the one hand, borrowing money from relatives can result in more favorable and flexible loan terms than a borrower might get from a bank. On the other hand, money issues can negatively impact important personal relationships if the loan isn’t paid back on time.

To better understand family lending and borrowing behaviors, FinanceBuzz surveyed 1,000 U.S. adults about whether they’ve taken money from or given money to family members before, how much that loan was for, how their lending experience turned out, and more.

Key findings

• Family lending by the numbers:
• 46% of respondents have either borrowed or lent a significant amount of money ($250+) to family.
• The most common borrowers are siblings.
• People most commonly lent money to cover general expenses and housing costs, but 15% of respondents didn’t know what their loan was for.
• Family members don’t pay loans back consistently.
• Only 56% of lenders were fully paid back by family members
• However, lenders have realistic expectations. Nearly a third (31%) never expected to see their money back.
• Family lending can cause problems.
• Nearly 1 in 4 lenders (24%) say that giving money to a family member had a negative impact on their relationship with the borrower.
• More than a quarter of lenders (26%) had to set up a formal payment plan to get their money back, while 25% reported that lending money led to awkward family interactions and hurt feelings.
• Only 15% of people who loaned money to family members said it was a good idea.

How much and how often are people lending to their family members?

An important first step in analyzing family lending is establishing just how common it is for people to borrow money from or lend money to a relative.

All told, nearly half of respondents, 46%, said they either borrowed money from or lent money to a family member. That includes 17% of people who have lent money to a relative, 15% who have borrowed from a family member, and 14% who have been both a lender and a borrower in a familial lending transaction at some point.

Looking beyond how many people have participated in family money lending, we also asked lenders how much money they’ve given to a family member. Most loans are relatively small, with 48% of respondents lending less than $500, though more than one in three loans (34%) were in excess of $1,000. Almost 1 in 10 (7%) of loans among family members were for more than $10,000. Taken together, the average familial loan was $2,676.

Who are they lending to?

Familial lending can take many forms based on the composition of the family in question, so we wanted to find out which combinations of lenders and borrowers are most common.

Siblings are the most common borrowers in family lending situations, with nearly one-third of transactions between a lender and their brother or sister. Around one in four (24%) have given money to their child, while a slightly higher percentage, 26%, have given money to an extended family member such as an aunt, uncle, or cousin. Finally, a little less than a fifth (18%) said they have lent money to a parent. Notably, not a single respondent indicated that they have had a grandparent borrow money from them.

What is the money for?

Now that we’ve covered the who and the how much of it all, we wanted to know what these loans were being used for, if lenders even knew at all.

The most common reason given for a family loan is to help a relative stay ahead of general everyday expenses, which is what 30% of family loans are used for. 22% of loans are used for housing expenses such as rent or mortgage costs, while 18% are needed to cover transportation costs. Interestingly, 15% of lenders said they don’t know what the money they gave out was going to be used for, showing that for some people, simply knowing that a family member needs financial help is enough for them to lend a hand and a few bucks, even without specific details.

Getting paid back: expectation versus reality

Lending money out is one thing, but getting paid back is another, with repayment not always being guaranteed.

One unique aspect of family lending is that borrowers and lenders have a personal connection, which can impact expectations when it comes to the eventual repayment of the loan. In that regard, lenders tend to be more pessimistic, with just 62% of those who gave money to a family member expecting to be fully paid back (with or without interest) compared to 85% of borrowers who entered into the loan expecting to make full restitution.

Nearly a third of lenders (31%) indicated that they didn’t think they would be paid back, including 8% who never expected any kind of repayment. Comparatively, just 9% of borrowers lacked confidence in their ability to repay the loan, with just 2% saying they never intended to pay the money back at all.

We also asked lenders to tell us about the actual repayment status of the loans they gave to family members, allowing us to compare expectations to reality. While 60% expected to be paid back fully, just 53% have actually had that happen. On a more negative note, while just 8% of lenders entered into a familial loan situation thinking they would never be paid back, more than twice as many, 17%, now believe their money will never be repaid.

Consequences of lending money to family members

When loans aren’t repaid to a financial institution, there can be legal repercussions. When the same thing happens to a loan between family members, the consequences are more personal.

Nearly a quarter of people who have lent money to a family member, 24%, report that entering into the loan ultimately had a negative impact on their relationship with that person, including 3% who said it ended the relationship entirely. By contrast, just 13% said that lending money to a family member had a positive impact on the relationship between them.

Looking at specific negatives that can happen as a result of a familial loan, 26% of lenders said they had to set up a formal payment plan to try and get their money back, which was the most common negative consequence. Exactly a quarter said that the loan resulted in awkward interactions and hurt feelings with their family member, while around a fifth said they got into arguments with the borrower (18%) or had growing resentment towards them (20%).

Is lending money to family ever a good idea?

Having taken stock of how many people have lent or borrowed money to family and their experiences getting paid back, the last thing we wanted to explore was whether people think lending money to family is a good idea or a bad idea.

A large portion of respondents, 40%, do not see familial lending as either positive or negative, but that still leaves a majority of the population with an opinion that leans one way or the other on the issue. Specifically, just 15% of people think that familial lending is a good idea, while three times that amount, 45%, think it’s a bad idea.

Advice from the experts

Lending money to family members can be a tricky subject. Lenders want to help because it involves family they care for, but they also want to avoid putting themselves in financial danger. That’s why the FinanceBuzz team asked a panel of experts to outline any potential risks of loaning money to family and if there are any legal protections that currently exist.

What are the biggest risks when lending large amounts of money to family and friends?

Are there any legal documents that exist to make lending to family and friends more secure?

Bottom line

When times are tough, we want to help those close to us if we can — especially if they’re family. However, long-lasting money lessons are sometimes more valuable than a quick fix such as a lump sum.

• Exhaust other options first. Before lending out a large amount of your own money, helping family members figure out how to get a loan can avoid putting yourself at risk.
• Do some research. There’s a myriad of options for borrowers nowadays. Taking time to look at some of the best personal loans can ensure borrowers are making the right choice for their needs.
• Teach your family how to be financially responsible. Teaching your family members how to pay off debt can ensure they know how to borrow responsibly and can make more informed financial decisions in the long run.

Methodology

FinanceBuzz surveyed 1,000 U.S. adults aged 18 or older using a survey platform. Responses were collected in December 2024.