When Loaning Money To Friends & Family Goes Wrong

Consider Lending Money

When lending money to a friend or family member, the last thing on your mind is usually formal demand letters, contracts, or Court proceedings. Most people trust that their loved ones will act responsibly and repay them in good faith. However, what should you do when your friend or family member refuses to pay you back, or can’t afford to? Whilst you might be prepared to forgo negligible sums, few people could write off loans of hundreds or in some cases thousands of pounds. In those circumstances, how can you recover your money without damaging the relationship?

What to consider before lending money

Although neither party would envisage the need for a formal contract to be drafted when lending money to family or friends, it’s a good idea to have some evidence of the transaction. Even an email or text message outlining the amount lent, as well as the repayment expectations. If the matter ends up in Court, this will be invaluable. Having this can help establish that the money was a loan, not a gift.

Open and transparent communication is vital. Before handing over the money, discuss your intentions and set a specific repayment date. This avoids any surprises and ensures both parties are on the same page. Clear communication can prevent confusion down the line.

If they refuse to pay

If the person who owes you money refuses to pay, you do have several options:

  • If the person can’t afford to repay immediately, consider agreeing on a repayment plan or an extension of time. This allows you to recover your money gradually without putting excessive pressure on the relationship, as long as you can personally and financially accommodate this. It can be helpful to involve a neutral third party. Alternatively, you might engage a solicitor to act on your behalf. Carefully worded correspondence from a solicitor can have the effect of reducing the emotional impact on both parties and helping to reach a fair agreement. Of course, they would also be able to assist if the matter escalates to the Courts.
  • In some cases, negotiation might fail, and you may need to resort to legal action. It’s essential to understand that just because someone is a family member or close friend, this does not mean you’re not entitled to your money. If all else fails, and you believe pursuing legal action is the only way forward, consult with a solicitor. They can guide you through the legal process and can approach the situation sensitively, to minimise the impact on your relationship.

If they cannot afford to pay

It can be uncomfortable to press a family member for money when you know that they are struggling, but this does not need to break down your relationship. If they cannot afford to pay you right now, an extension or a repayment plan is a great way to make sure you get your money back without causing too much burden, as long as they and you are open to this.


While lending money to friends and family can be a delicate situation, taking precautions, maintaining clear communication, and being prepared for potential issues can help protect your finances and maintain your relationship. Remember that seeking professional legal advice early on can make the process smoother and less emotionally taxing for all parties.

How can we help?Considerations Before Lending Money

Joseph Collis is a Paralegal in our expert Debt Recovery team.

At Nelsons, our team in Derby, Leicester and Nottingham is experienced in dealing with these scenarios and can work with you to ensure you get the best results. If you need advice on recovering funds from a struggling debtor, including filing proof of debt forms, consult our Debt Recovery team, who will be happy to help.

Please contact us on 0800 024 1976 or via our online enquiry form.

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