Lending Money to Friends or Family? Here's How to Get Your Money Back
Loaned money to a friend or relative and not been repaid? You have more options than you think, from a simple reminder to a court claim.
The Problem Is More Common Than You Think
A 2023 survey found a third of UK adults are currently owed money by friends or family, with more than a quarter owed over £1,000. Nearly half feel too awkward to ask for repayment.
Whether it’s a family loan, a loan for family that’s gone quiet, or a friend avoiding your message, this page walks you through exactly what to do.
Your 3 Options at a Glance
| Step | What It Is | When to Use It |
| 1. Talk + gather evidence | Polite reminder backed by proof | First attempt at repayment |
| 2. Letter before action | Formal written demand, 7-day notice | When reminders are ignored |
| 3. Small claims court | Legal claim up to £10,000 | Last resort; CaseCraft.AI automates this |
Step 1: Talk First, But Gather Your Evidence
When someone owes you money and is avoiding you, the best first move is still a calm, direct conversation. Ask why the money owed hasn’t been repaid and propose a repayment plan.
Evidence to collect:
- Bank transfer records showing the loan was made
- Text messages, emails or WhatsApp threads referencing repayment
- Witness statements if the agreement was verbal
- Any signed or written lending money to friends contract
Note: Even without a written contract, a verbal agreement supported by bank statements or messages can be enforceable in court, but written proof makes your claim significantly stronger.
You don’t need to shame anyone publicly. If you’ve searched “how to shame someone who owes you money”, you’re not alone, but public pressure can backfire legally and personally. The better path is evidence, mediation, and formal process.
Step 2: Send a Letter Before Action
If reminders haven’t worked, send a formal letter before action (also called a pre-action letter). This is a legal requirement before filing a small claims case.
Your letter must include:
- The exact amount of money owed
- The date the loan was made and the agreed repayment date
- A minimum of 7 days’ notice before court proceedings
- Proof of delivery (recorded post or email with read receipt)
A solicitor can draft this for around £60 including VAT, or use CaseCraft.AI’s free letter before action template to do it yourself in minutes.
Step 3: Claim Through the Small Claims Court
If you still haven’t been repaid, you can claim money back through the small claims track in England and Wales. This covers simple money disputes up to £10,000.
Court Fees at a Glance
| Claim Amount | Filing Fee | Hearing Fee |
| Up to £300 | £35 | £27 |
| £300 – £500 | £50 | £55 |
| £500 – £1,000 | £70 | £80 |
| £1,000 – £1,500 | £80 | £115 |
| £1,500 – £3,000 | £115 | £170 |
| £3,000 – £5,000 | £205 | £335 |
| £5,000 – £10,000 | £455 | £335 |
From 22 May 2024, you must also attend a free one-hour mediation session provided by HM Courts & Tribunals Service before a hearing; many disputes settle here without ever reaching a judge.
If the debtor still refuses to pay after judgment, enforcement options include:
- Warrant of control: £83
- Attachment of earnings order: £119
CaseCraft.AI handles the entire process, from generating court-ready documents to tracking deadlines and supporting enforcement. You pay nothing upfront and only a 10% success fee if you win (vs 25–50% with most no-win-no-fee solicitors).
Do You Have a Loan Agreement? Why It Matters
Lending money to friends or lending money to relatives without paperwork is incredibly common, and incredibly risky. A lending money to a friend contract (or contract to loan money to a friend) protects both sides and prevents HMRC from treating the transfer as a gift.
What a Strong Loan Agreement Covers
- Loan amount and repayment terms, how much, when, and over what period
- Interest, if charged, the lender must declare this as income on their tax return
- Collateral or guarantor, optional but adds significant protection for larger amounts
- Signatures and bank transfer proof, both create an audit trail that proves the money is a loan, not a gift
HMRC note on family loans: Under UK law, loaning money to family is legal with no set limit on amount. However, if you later forgive the loan, HMRC may treat it as a gift, triggering the 7-year inheritance tax rule. A written agreement showing it was always a loan reduces this risk.
Lending Money to Family: UK Law & Tax Notes
Is loaning money to family legal in the UK? Yes, entirely. There is no legal cap on how much money you can lend a family member in the UK. But there are important considerations:
- Only lend what you can afford to lose
- Use bank transfers, never cash, to create a clear audit trail
- Consider what happens if the borrower divorces or goes bankrupt (the loan becomes an unsecured debt)
- For family loans over £10,000, seek independent legal advice
- If you charge interest, you must report it as income to HMRC
- Forgiving the loan = potential gift for inheritance tax purposes (7-year rule applies)
Ready to Recover What You’re Owed?
Whether you’re dealing with an unpaid family loan, a loaning money to a friend situation gone wrong, or a person who owes you money and has gone quiet, CaseCraft.AI gives you a clear, affordable path to repayment.
✓ AI-generated court-ready documents
✓ Step-by-step mediation and filing support
✓ Enforcement tracking if they still don’t pay
✓ No upfront cost, 10% success fee only
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Yes. Lending money to friends and relatives is completely legal under UK law, and you can charge reasonable interest. There’s no specific law against a family loan, but you should document it with a written agreement to avoid it being mistaken for a gift. For amounts over £10,000, seek legal advice.
There is no legal limit on how much you can lend to a family member in the UK. That said, you should only lend what you can genuinely afford to lose, and for large sums, a formal written agreement and professional advice are strongly recommended.
First, gather proof: bank statements, messages, emails. Then send a polite reminder followed by a letter before action giving at least 7 days to repay. If there’s still no payment, you can recover the debt through the small claims process for amounts up to £10,000. CaseCraft.AI can file and manage the entire claim for you.
You’re not legally required to have one, but a lending money to a friend contract is strongly recommended. Without written proof, you can still enforce a verbal agreement using bank statements or messages, but it’s harder to prove in court. A written contract to loan money to a friend removes the ambiguity entirely.
If someone owes you money and is avoiding you: send a written reminder, then a formal letter before action. Don’t resort to public pressure; use evidence, mediation, and formal procedure. If they continue to avoid you, file a small claims case and enforce the debt through a warrant of control or attachment of earnings order.
Yes. You can issue a claim in the small claims track for debts up to £10,000. You’ll need to follow the pre-action protocol, attend mandatory mediation, and pay a filing fee (£35–£455 depending on claim size). CaseCraft.AI automates the paperwork and only charges a 10% success fee, nothing upfront.
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