"Terms of endearment" include pressure and unpaid loans
WINNIPEG, Jan. 7 /CNW/ - Lending between friends and family is common
practice for Canadians, but a new Investors Group poll finds that mixing money
and relationships can be risky business.
While more than six-in-ten Canadians (64 per cent) have loaned or
borrowed more than $500 from friends or family, more than a quarter (26 per
cent) report that the loans were not fully repaid. One-third (31 per cent) of
those who agreed to lend money felt pressured to do so. The majority of those
who experienced the greatest feeling of pressure when asked to loan money (54
per cent), did not get repaid at all.
"Everyone has the best intentions when it comes to helping out a loved
one, especially if there's an urgent need or an emergency. Some may give in to
feelings of obligation against their better instincts," said Debbie Ammeter,
Vice President, Investors Group. "Family ties notwithstanding, unpaid loans
can strain relationships and create stress."
Lending terms more attractive
Easier credit terms including no interest charges and less demanding
payment schedules were cited as primary reasons why Canadians chose to
approach family members or friends for a loan.
Half (51 per cent) said they approached a friend or family member rather
than a lending institution because they would either pay no interest or less
interest on the loan. More than a quarter (27 per cent) chose personal lending
because the repayment terms were more flexible. But for 13 per cent, family
and friends were their only available source of cash as they would have been
unable to obtain credit elsewhere.
The survey also found that more than eight-in-ten (83 per cent) Canadians
who had loaned or borrowed funds from someone in their personal circle did so
without a written agreement. Further, the survey found that only 23 per cent
of borrowers paid interest on their loans.
"Separating 'business' arrangements from personal matters may seem
uncomfortable to both lender and borrower, especially if the situation doesn't
seem formal," said Ammeter. "But loaning money to a loved one doesn't preclude
asking for specific loan conditions or a pay-back plan and can reduce the
potential for disagreements and long-term future rifts."
Emergencies most common loan purpose
The majority of loans between friends or family were for moderate
amounts, with two-thirds (67 per cent) borrowing between $500 and $5,000 and
14 per cent borrowing between $5,000 and $10,000. Fifteen per cent borrowed
more than $10,000.
For both lenders and borrowers, top loan purposes were financial
emergencies (25 per cent), big-ticket purchases (15 per cent), education (13
per cent) and a home down payment (11 per cent). Lesser priorities were house
repairs (7 per cent), starting a business (5 per cent), taking a vacation (5
per cent) or other big event (3 per cent).
"Anyone can find themselves in a situation when they need a helping hand,
and turning to those closest to us is natural," said Ammeter. "Having a formal
agreement and plan in place when securing a personal loan, won't test the ties
A total of 2,002 surveys were completed with Canadian adults between
September 18th and September 24th 2008, using the Harris/Decima eVox online
panel. The data is weighted in tabulation to replicate actual population
distribution by age and sex within each region according to the 2006 Census
Investors Group, founded in 1926, is a national leader in delivering
personalized financial solutions to Canadians through a network of
approximately 4,500 Consultants located throughout Canada. In addition to an
exclusive family of mutual funds and other investment vehicles, Investors
Group offers a wide range of insurance, securities, mortgage and other
financial services. Investors Group is a member of the IGM Financial Inc.
(TSX: IGM) group of companies. IGM Financial is one of Canada's premier
financial services companies with over $101 billion as of December 31, 2008 in
total assets under management.
For further information:
For further information: Ron Arnst, Investors Group, (204) 956-3364,
firstname.lastname@example.org; Teresa Pagnutti or Meredith Adolph, Environics
Communications, (416) 969-2721, (416) 969-2667, email@example.com,