A study by the responsible lending platform “Credit24,” aimed at determining and monitoring the financial situation, saving, and borrowing habits of Lithuanian residents, showed that in the past 12 months, nearly 10% of respondents borrowed additional funds from their significant other, 9% turned to their parents, and 8% to friends.
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Meanwhile, just over 7% of residents used bank services, and 6% of respondents took loans from credit companies. 57% of respondents reported not borrowing money.
“The study results show that when additional funds are needed, Lithuanian residents more often borrow from their closest environment. We have been observing this trend for some time – we have been conducting the study for five years, and throughout this time, relatives remain one of the most common sources of extra money. Borrowing from family or friends may seem like a simpler, faster, and cheaper solution for many. However, it also carries very serious risks, especially for the person lending the money. Without a clear agreement or officially formalized obligations, it can be difficult to recover unrepaid money,” notes Tomas Bataitis, head of “Credit24.”
Borrowing habits in Lithuania also vary depending on the age of residents. The youngest respondents, aged 18–24, most often turn to family or friends for financial help. Meanwhile, official financial institutions’ services are used somewhat more often by older working-age and capital city residents.
Debt can cost relationships
Although borrowing among close people often seems like a simpler solution, it can have consequences that are not considered in advance. The situation can be especially complicated when the debt is not repaid on time or not repaid at all.
Psychologist Marius Daugelavičius notes that borrowing from close ones almost always threatens interpersonal relationships.
“A person who borrows expects to have the opportunity to repay. When they do not repay, the lender experiences not the best feelings. They suffer, get offended, and get angry, perhaps pressure, demand, and reproach. Then the borrower, in turn, also gets hurt and offended. This creates all the conditions for conflicts,” says M. Daugelavičius.
The speaker also states that before lending to a close person, one should think carefully because the risk involves not only relationships but also the money itself – there is no guarantee that it will be recovered.
“People borrow for various reasons – perhaps for a business that may fail or for various investments that are not always successful. So there is a chance to lose that money. And what will you do when they do not repay?” asks the psychologist.
M. Daugelavičius adds that the risk can be reduced by clearly agreeing in advance on the terms of debt repayment. According to him, it is worth drawing up a contract, having it notarized, and in some cases, a pledge can be foreseen.
“If this is done wisely, of course, then there are fewer chances to have some problem. But the relationship problem still remains. Well, the brother will repay the debt – so what will happen to our relationship then? In general, it is already uncertain,” the psychologist reflects.
Borrowing – a responsible decision
Regardless of whom you borrow from, the most important thing before making a decision is to realistically assess your financial capabilities and ensure that loan payments will not cause financial difficulties. It is also important to choose licensed and officially operating lenders. Contract terms, interest rates, fees, and consumer rights protection should be clear.
“Official lenders assess a person’s ability to repay before granting a loan – they consider their income, existing obligations, and credit history. Credit history and creditworthiness assessment are not only ways to protect the lending company. It is also protection for the client so that they do not take on obligations they will later be unable to fulfill. Therefore, before borrowing, it is important to realistically assess your financial capabilities and borrow only as much as you can truly afford to repay,” says T. Bataitis.
The company head emphasizes that it is also important to check whether the lender is listed in the official Lithuanian Bank register before borrowing. Borrowing from illegally operating lenders can pose significantly more risks to the consumer.
“It is especially important not to borrow from unofficial, unregulated lenders. In such cases, a person may be left without the usual consumer protection mechanisms, and unclear or non-transparent borrowing conditions can push them into increasing debts. Moreover, in case of a dispute over debt repayment, legal problems may arise. Therefore, it is always worth checking who the lender is and whether they have the right to provide such services before borrowing,” says T. Bataitis.
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