Issues around money can often be the spark that causes family members to fall out and friendships to collapse, especially when it comes to borrowing and loans.

However, millions are being forced to borrow from friends and family or to take out credit in order to cover unexpected bills, figures show, as households find themselves increasingly under financial strain.

More than a third of people, 36 per cent, said they have been forced to take out a loan or credit to cover the cost of unforeseen bills, according to data from insurer Howden Life and Health, shared exclusively with This is Money.

So many see these borrowing options as higher risk than borrowing from people they know. In fact, as many as 26 per cent, some four million people, said they have borrowed money from friends or family to pay these bills.

In many cases, borrowing from family members can be a more relaxed and lenient option for borrowers, but this can lead to problems for the lender.

Among young people, the situation is even worse. Almost half, 45 per cent, of those aged between 18 and 24 have gone to friends and family members to plug a gap in their finances when in need.

The figures come as some 15.7million people, around a quarter of the UK's adult population, say they have faced a surprise expense of £5,000 or more in the past year alone,

Just 71 per cent of these were able to cover at least some of the cost with their savings and investments.

Jon Carroll executive director at Howden Life & Health said: 'With rising living costs and wages failing to keep pace, it's understandable that many people are struggling to cope with unexpected expenses.

'But it's really worrying to see so many turning to credit or friends and family, make ends meet.'

With more people looking to borrow from those they know, however, comes the issue of repayment.

What if you have lent money to friends or family?

Lending money to close ones can often be a painless experience, based largely on goodwill and an expectation that it will be paid back in good time, but this isn't always the case.

If someone you have lent to isn't paying you back, it could be tempting to push them for the money, and sometimes you might risk letting your emotions get the better of you.

However, Rob Morgan, of Charles Stanley, says: 'Try to work out what is going on before going in all guns blazing – there could be a family crisis or another very good reason behind their behaviour.

'Be patient and tactful as far as you can and remember that if they value your relationship, they will do their best to pay you back as agreed.'

This is echoed by Simonne Gnessen, founder of Wise Monkey Financial Coaching, who says that somebody is being evasive when it comes to repayment it is likely that there is more at play than you might first think.

She said: 'You need to recognise that underneath all of this might be shame, guilt or fear or a sense of being overwhelmed.

'Come at it with compassion, show that you appreciate that they might be facing fear or guilt and that you want to address it together.'

'Communicate clearly and honestly and build a plan together,' she said, 'maybe that means breaking it down into payments over a few years or whatever is affordable.'

Gnessen says it is best to find a solution that works for both you and the borrower.

She added: 'It's often the emotions behind it that people don't really pay very much attention to… if somebody isn't paying back money, there might be things getting in the way, but the thing that spoils relationships is the unspoken feeling.'

In many cases, a simple reminder might actually be all that suffices.

Morgan said: 'If they are forgetful just remind them politely and without being confrontational. Perhaps explain why you need the money yourself for something, which tends to plant a seed so that they are more likely to remember.

He added: 'Sometimes there can simply be a misunderstanding. Ideally, you'll have set clear terms for any loan at the outset, and as a trusted friend or family member they should respect your arrangement as you have stepped up to help them.

'But if they have got the wrong end of the stick then you'll need to point that out in a friendly manner.'

Of course, it is possible that the person you have lent money to is deliberately avoiding repayment.

Although it is best to only come to this conclusion once you have explored the more likely possibilities, you may still find yourself in a position where you need to take action to recover your money.

What are your legal rights?

Money exchanged between close friends or family is presumed to be a gift, according to consumer lawyer Dean Dunham.

He said: 'That means if you hand over cash without anything in writing, the law starts from the position that you never intended to create a legally binding agreement and you may struggle to get it back unless you can prove otherwise.'

As a result, he says it is important to set out the terms of your lending before you commit, including what you are lending, how and when it will be repaid and if you will charge interest.

He said: 'Put those terms in writing. Ideally, use a simple loan agreement (templates are widely available) and have both parties sign it in the presence of an independent witness. Even a typed document signed by both of you is far better than relying on memories and goodwill.

'If the borrower later refuses or fails to repay, your first step should be a "letter before action". This is a formal written demand that explains the original loan terms, the amount, any interest, and the repayment date; and makes clear that those terms have now been breached.

'You should set a firm deadline for repayment, usually 7–14 days, and state that you will start court proceedings if the money is not returned within that time.'

Dunham says claims can be issued via Small Claims Court online and without legal representation.

He added: 'The key point, however, is that you must be able to show the court that both sides intended the money to be a loan. A written agreement is the strongest evidence, but if you don't have one, you may still rely on bank records, text messages, emails, or even a credible independent witness who can confirm what was agreed.'