Consumer debt levels have been widely reported over recent months but until now little has been known about the UK’s hidden debt – the money people have borrowed from their family and friends and even their employers.

Now, new research from The MarketPlace at Bradford & Bingley, reveals that over half of all UK adults either currently owe or have previously borrowed money from their family, friends, partner or employer.

The research, conducted by YouGov on behalf of The MarketPlace, shows that 49% either currently owe or have previously borrowed from their family; 18% from their friends; 14% from their partner and 6% from their employer. 14% have borrowed between £100 and £500 and 26% have borrowed more than £500, 17% of whom have borrowed in excess of £1,000.

Surprisingly though, given the prevalence, only 5% are happy asking family or friends to lend them money with 38% admitting they hate it but sometimes find it necessary. However, interestingly, paying them back isn’t high on the pecking order with 50% more inclined to pay back financial institutions such as banks or credit card companies ahead of family or friends. Only 30% would repay friends or family first.

Michael Senior, head of personal lending for The MarketPlace, comments: “It appears that many people don’t like asking for handouts, however, they don’t seem too eager to pay their family or friends back.”

“Of course it is vital to keep up the repayments to financial institutions, but being sluggish with the money you owe your loved ones could cause unnecessary bad feeling. The best course of action will depend on individual circumstances, but a potential solution for some could be debt consolidation, thereby ensuring all money owed is paid back with a sensible repayment schedule.”

Breaking the debt cycle

Three quarters (72%) said they had other forms of borrowing such as credit cards, store cards, loans, overdrafts, hire purchase agreements etc and a third (33%) said they were worried about the amount of debt they had.

Surprisingly, however, only 6% think they should consolidate their debt and have a set plan of paying it all off.

Senior continues, “One in ten people (12%) feel embarrassed about talking about the amount of debt they have with family and friends and a third are worried about their debt levels, however, so few are actually prepared to do anything about it. Wrapping borrowings together though, could be a solution for many wanting a way out of their debt.”

There are three key ways of wrapping your debt together, says B&B: taking out a personal loan; transferring your balances to a credit card offering a no or low interest rate balance transfer deal; or remortgaging, if you are a homeowner. Which one to choose, however, will depend on your individual circumstances and, crucially, how disciplined you expect to be at paying the debt back.

But Senior warns: “Once you’ve consolidated your debt, it’s vital to rein in those spending urges before you arrive back at square one.”

“Before making a final decision, though, all the pros and cons need to be weighed up. For the majority of borrowers who owe money to different financial organisations, friends and relatives, consolidating debt - if managed properly - will save you money and help keep family harmony by ensuring you repay all the IOUs!”