It’s tough to say no to a friend in need, even when there’s money involved. “Mates loans” can seem like a simple solution to a sudden cash crisis, but a problem shared isn’t necessarily a problem halved. It’s just a problem two people now have – and a lot of us are biting off more than we can chew. Let’s crunch a few numbers…

As a nation, we owe about £2,800 to our friends and families. That’s around 10% of our overall debts, not counting mortgages. For the most part, these loans are really casual, without a lot of strings attached.

That’s fine, as long as everyone knows what they’re getting into – but with 1 in 10 of us having lost a mate over money you’re risking more than just your cash if it all goes sideways. Around half of us have knowingly lent out money we we’d probably never see again, but “no” is a tricky word to find when a friend’s asking.

So how big of a problem is this? Well, it turns out that 17% of us are happy to lend up to £500 to mates in a bind. That’s an average taken from across the UK, of course. Scottish mates are a little freer with their cash, for instance, with 20% saying they’d dip into their pockets for a friend. In the East Midlands, on the other hand, that figure drops to 16%.

Obviously, before helping out a mate with a fistful of your hard-earned cash, you need to know you can spare it. 45% of casual loans are never paid back, and with most people happy to lend an average of £165, that’s not just pocket money. Even when the money is returned, around a third of the time it’s later than agreed. That means you’ve got to think about it from both sides – can you afford to lose the loan, and can they afford to take it on? Again, this is tricky stuff to talk about with mates – especially when they’re in a tough spot.

You’ve also got to think about setting some terms. Most of us would expect to get our cash back inside a month – or 6 weeks at the most. The thing is, if neither of you has a plan about how the repayments work, you’re putting your money and your friendship at risk right from the start. Okay, so maybe you don’t want to go writing a formal agreement or anything. That’s fine – but a simple IOU note could at least help seal the deal without making things too weird. You probably won’t need to go all “bank manager” over it by asking for collateral, since most of these loans are there to cover tricky bills of £65 or so. Honestly, though, if you’re that worried about getting your money back you probably shouldn’t be lending at all.

That brings up another important point. There are actually better ways to help a mate out than to pry open your own wallet to feed theirs. If a loan’s their only option, you could look into acting as a “guarantor” for them. That’s a little less directly risky for you, and means you won’t end up making awkward decisions about whether to charge Auntie Jean interest on the £50 you lent her.

Better yet, you could set your mate up to get some tax back from HMRC. A tax refund beats a loan every time, since it’s their own cash they’ll be getting. An average tax refund comes to a whopping £755.89 a year – more than enough to cover anything a typical “mates loan” could. What’s more, when you refer a friend or family member to RIFT through our Refer a Friend scheme, everyone wins. Here’s how it works:

  • You refer someone to us who might be owed some tax back (ask their permission first, of course).
  • If they end up claiming a tax refund with RIFT, we'll send you £50 as thanks.
  • For every 5 people you refer, you get a bonus of £150 on top. That's £400 for 5 referrals.
  • Whenever you use Refer a Friend, you get entered into our prize draws. Prizes range from £150-£500 in cash right up to a Star Prize worth a whole lot more!

Your mates can claim back any tax they’re owed for up to 4-years. If they’ve never claimed before, that means they could be in line for an average refund of well over £3,000!

You can read up on RIFT Refer a Friend here. It’s a great opportunity to help out a mate in need – and to earn a little extra cash for yourself at the same time. After all, isn’t that what real friendship’s all about?