Millions of Aussies turn to loved ones for loans

Desperate Aussies are being forced to turn to friends and family for help with their finances as cost of living pressures hit home.

QCOSS Chief Executive Officer Aimee McVeigh in Brisbane. Picture: Lyndon Mechielsen/Courier Mail

Desperate Aussies are being forced to turn to friends and family for help with their finances as cost of living pressures hit home.

More than one in three Australians have had to financially bail out a loved one in the past year, a new survey has found.

The data from Finder revealed 36 per cent or roughly 7.7 million Australians had given a hand out to a relative or mate in need, with the money mostly going to rent, groceries and utilities.

Unexpected medical costs and paying off debts also saw people turn to family and friends for cash; as did major one-off purchases like a car or home appliance, and the need for a deposit or rent for housing.

The biggest recipients, according to the survey, were parents, with one in eight Aussies providing financial aid to their folks; while one in 10 Australians helped out adult children.

Finder personal finance expert Sarah Megginson said she was unsurprised by the trend with the cost of living crisis putting undue pressure on people’s budgets.

“You have people paying $200 to $300 more per week for rent or for their mortgage than they were this time last year, and the increases keep coming year after year,” she said.

“Add this to increases in petrol, groceries, insurance and energy, and it’s pushing people to the brink of what they can afford. They’re turning to all sources, including friends and family, to make ends meet.”

High fuel prices is one issue pushing people to the brink when it comes to cost-of-living.

Financial Counselling Australia co-CEO Dr Domenique Meyrick revealed borrowing money from family was common among those contacting the National Debt Helpline as an increasing number of Aussies struggled to cover their expenses.

“There is a new demographic of employed people who are being forced into financial hardship so, sadly, it doesn’t come as a surprise that many people are seeking financial assistance (from friends and family),” she said.

Queensland Council of Social Service CEO Aimee McVeigh said the new data also backed up her organisation’s statewide affordability report.

“We have a record number of Queenslanders who are seeking support from community organisations for food and emergency bill relief so saying there are large numbers of people needing support from family and friends is consistent with what we’re seeing,” she said.

QCOSS and FCA both reported that housing was the biggest financial stressor, with low income households spending 40 per cent of their pay cheque on keeping a roof over their heads.

While taking a loan from friends or family might be one of the easiest ways to access extra funds, Mrs Megginson warned Aussies to do so with a degree of caution.

“It’s important to set really clear expectations at the outset of exactly how much you’re loaning, and when you want it repaid, and what your plans are if the repayments go off track,” she said.

“If someone borrows money from a relative and doesn’t pay it back right away, but then they book a holiday or spend money on something ‘frivolous’, that family member might start to feel resentful. Having really clear expectations around repayments can help you avoid that tension and resentment.”

She advised for people to include all details of the loan in writing, including how much it’s for, the repayment amount and the schedule for it to be paid back; and to keep clear and open lines of communication throughout the process.

“If you’re the loaner, message them after a repayment to say thank you and remind them of how much they’re paid,” she said.

While Ms McVeigh encouraged struggling Aussies to look into government-funded no-interest loan schemes, which were available for loans of up to $3000 without fees or charges to help with unexpected costs like medical expenses, car repairs, appliances and more.

“It’s a much better way of accessing money for emergency essentials rather than going to a payday lender or going without,” she said.

The FCA also advised those giving out the loans ensured they were in the financial position to do so first.

“If you do want to lend money to family or friends, figure out what you can afford first,” Dr Meyrick said.