One in 20 Brits have lent over £5,000 to a friend
- Kathryn Gaw
- On December 20, 2016
ALMOST one in 20 (four per cent) of Brits have lent more than £5,000 to a friend, yet 42 per cent of these informal peer-to-peer lenders never see their money again, a new survey has found.
According to upcoming P2P platform Flender, three quarters of us (74 per cent) have lent money to a friend or relative over the past 12 months, making the friends and family lending market worth more than £2.9bn per year in the UK alone.
Read more: UK P2P lending hits £6.5bn
More than 95 per cent of informal lenders have never charged interest to people they know, but 47 per cent said that they would consider doing so. More than half of the people surveyed suggested that one per cent would be a fair interest rate when lending to people they know, but a massive 89 per cent said that anything up to five per cent would be acceptable.
Flender is hoping to capitalise on this trend with the launch of its new peer-to-peer platform, which allows users to borrow and lend money within their own social networks at an interest rate of their own choosing, including zero per cent.
“The market of friends and family and connections is already there – we’re not creating it,” said Kristjan Koik, co-founder and managing director of Flender. “But it’s not formalised. There are no contracts, there are no credit checks, there are no affordability checks. So what we’re doing is putting this user experience in place and formalising all those transactions which will make this market even bigger.”
The study also uncovered evidence that informal money lending leads to personal conflict. Almost a quarter (23 per cent) of people have fallen out with someone over money issues relating to lending and borrowing, and 18 per cent of respondents admitted they felt obligated to lend money if a relative was asking.
Co-founder and sales director Oli Cavanagh told Peer-to-Peer Finance News that the soon-to-be launched platform will take the emotion out of friends and family lending, by automating the entire process, including loan collection.
“There’s no paperwork and monthly payments at the preferred interest rate are all automated, meaning you never have to ask for your money back,” he added.
The platform also allows business owners to raise funds through their existing customer base and professional connections.
Flender will be launching imminently, after raising more than €500,000 (£421,000) from angel investors and through crowdfunding site Seedrs. The app will be available to users across the UK and Ireland, with the capability to carry out transactions in multiple currencies.
Koik and Cavanagh told Peer-to-Peer Finance News that they plan to expand into Scandinavia next, before rolling out the product across Europe.
The firm is operating on an interim licence from the Financial Conduct Authority and the co-founders said that they would consider offering an Innovative Finance ISA once they have been fully authorised.