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One in six people who have loaned money to friends or family say that it has damaged the relationship, according to research by thinkmoney*. That’s a lot of people – and a lot of friendships that may never be the same again.

Lending cash to people close to us doesn’t always lead to problems down the line but our survey shows that it does have consequences for many people. Friendships are tested all the time but add money into the equation and that’s a whole different kettle of fish.

Who is affected most?

We discovered that the younger you are, the more likely it is that money lending will come between you and your friends and family. One in five people aged between 18 and 34 said loaning cash had damaged a relationship, compared with under one in ten of the over-55s.

Meanwhile, people living in the East Midlands and London seem the most likely to run into problems if they lend cash to friends and family. However, four fifths of men and women from the North East said money-lending had left their relationships unchanged.

Why is there a problem?

It’s difficult to say no to a friend or family member in need, particularly in times of economic hardship. Is it ever a good idea? And, if you’re strapped for cash yourself, putting your hand in your pocket can be harder than your friend or family member imagines.

What if your financial circumstances change suddenly and you need the loan repaid? If your friend isn’t in a position to pay, this could cause long-term damage to your relationship. And, if you’re worried that they may never return the cash, it could mean the end of your friendship.

What’s the solution?

There are things you can do to try and make sure your friendship doesn’t suffer because of money. For example, you could set up a repayment plan with your friend or family member based on a realistic assessment of their ability to repay the loan. Or you could draw up a written contract for you both to sign in the presence of independent witnesses.

At the end of the day, you may also need to prepare yourself to forgive your friend if some, or all, of the loan goes unpaid.

The thinkmoney Current Account could help you and your friends and family members to budget sensibly. Find out how here.

*Opinium Research carried out 2,003 online interviews between April 12th-15th, 2013.

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