More Americans are turning to friends for financial help as high costs of living strain household budgets and traditional borrowing becomes expensive. Personal loan interest rates average 12.27 percent and can reach 36 percent, making informal arrangements with trusted friends a more appealing alternative. The shift reflects broader economic pressures facing many families.

A 2025 LendingTree survey found 75 percent of respondents had lent money to a friend, with men, millennials and parents most likely to do so. Surprisingly, lenders were more likely to report positive effects on friendships than negative ones. In one case, Kelly McCain transferred $10,000 to her best friend of 22 years in December with no written agreement, interest or repayment timeline. Her friend Kate Williams plans to fully repay the loan by mid-2027.

Financial psychologists warn that unpaid loans can permanently damage relationships. One in three respondents in the LendingTree survey reported losing a friend over money. Without a written contract outlining terms, the money could legally be considered a gift, according to Jackie Combs, a lawyer in Los Angeles. Both borrowers and lenders should consider the opportunity cost of these arrangements and be prepared to treat unpaid loans as gifts.