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Lending between family and friends can test the ties that bind, Investors Group poll finds

“Terms of endearment” include pressure and unpaid loans

Winnipeg, MB – January 7, 2009: Lending between friends and family is common practice for Canadians, but a new Investors Group poll finds that mixing money and relationships can be risky business.

While more than six-in-ten Canadians (64 per cent) have loaned or borrowed more than $500 from friends or family, more than a quarter (26 per cent) report that the loans were not fully repaid. One-third (31 per cent) of those who agreed to lend money felt pressured to do so. The majority of those who experienced the greatest feeling of pressure when asked to loan money (54 per cent), did not get repaid at all.

“Everyone has the best intentions when it comes to helping out a loved one, especially if there’s an urgent need or an emergency. Some may give in to feelings of obligation against their better instincts,” said Debbie Ammeter, Vice President, Investors Group. “Family ties notwithstanding, unpaid loans can strain relationships and create stress.”

Lending terms more attractive

Easier credit terms including no interest charges and less demanding payment schedules were cited as primary reasons why Canadians chose to approach family members or friends for a loan.

Half (51 per cent) said they approached a friend or family member rather than a lending institution because they would either pay no interest or less interest on the loan. More than a quarter (27 per cent) chose personal lending because the repayment terms were more flexible. But for 13 per cent, family and friends were their only available source of cash as they would have been unable to obtain credit elsewhere.

The survey also found that more than eight-in-ten (83 per cent) Canadians who had loaned or borrowed funds from someone in their personal circle did so without a written agreement. Further, the survey found that only 23 per cent of borrowers paid interest on their loans.

“Separating ‘business’ arrangements from personal matters may seem uncomfortable to both lender and borrower, especially if the situation doesn’t seem formal,” said Ammeter. “But loaning money to a loved one doesn’t preclude asking for specific loan conditions or a pay-back plan and can reduce the potential for disagreements and long-term future rifts.”

Emergencies most common loan purpose

The majority of loans between friends or family were for moderate amounts, with two-thirds (67 per cent) borrowing between $500 and $5,000 and 14 per cent borrowing between $5,000 and $10,000. Fifteen per cent borrowed more than $10,000.

For both lenders and borrowers, top loan purposes were financial emergencies (25 per cent), big-ticket purchases (15 per cent), education (13 per cent) and a home down payment (11 per cent). Lesser priorities were house repairs (7 per cent), starting a business (5 per cent), taking a vacation (5 per cent) or other big event (3 per cent).

“Anyone can find themselves in a situation when they need a helping hand, and turning to those closest to us is natural,” said Ammeter. “Having a formal agreement and plan in place when securing a personal loan, won’t test the ties that bind.”

A total of 2,002 surveys were completed with Canadian adults between September 18th and September 24th 2008, using the Harris/Decima eVox online panel. The data is weighted in tabulation to replicate actual population distribution by age and sex within each region according to the 2006 Census data.

Investors Group, founded in 1926, is a national leader in delivering personalized financial solutions to Canadians through a network of approximately 4,500 Consultants located throughout Canada. In addition to an exclusive family of mutual funds and other investment vehicles, Investors Group offers a wide range of insurance, securities, mortgage and other financial services. Investors Group is a member of the IGM Financial Inc. (TSX: IGM) group of companies. IGM Financial is one of Canada’s premier financial services companies with over $101 billion as of December 31, 2008 in total assets under management.

For more information contact:
Ron Arnst
Media Relations
(204) 956-3364
ron.arnst@investorsgroup.com		 Teresa Pagnutti
Environics Communications
416-969-2721
tpagnutti@environicspr.com		 Meredith Adolph
Environics Communications
416-969-2667
madolph@environicspr.com