Loan from Bank of Mum and Dad

raelill

Hi

I'm hoping someone can help.

My mum and dad have recently retired and have a sizeable lump sum in various accounts, but only earning around 3.5% - 4.5% maximum.

We (hubby and I) have a number of outstanding debts on a credit card, personal loan and small overdrafts amounting to just under £4000.

My mum has suggested that she lends us the money to pay these off :T and we pay her interest on this "loan" - more than she'd get on her savings but less than we'd pay on our debts.

My question is (a) does anyone have any idea what sort of interest would be fair for both - I can't find anything on hubby's overdraft but I know his loan's on 9.9% APR and my credit card interest is 19%. Second question is how to I calculate APR on overdraft - hubby's is down to £450 with monthly interest charges of about £7.

Mum was saying about 4% - 5% interest but is that flat rate, ie, about 10% APR??

Can anyone help? I want Mum and Dad to come out favourably as I know for us it's an amazing offer!

Thanks
Rachel

davetrousers

Sounds like you're making this more difficult than it needs to be.

Look at how much a £4k loan would cost (ie total repayable) on the high street. Maybe look at several. Then agree a total repayment figure somewhere between this and the £4k borrowed. Don't worry about %

raelill

I'm sure I am Dave!

I've now found a Savings Interest Calculator and on £5000 loan, 5% interest would be £525 which sounds much more like it and we'd still save over £80 a month against what we're paying now.

Does that sound fair?

Rachel

[Deleted User]

yes seems fair to both parties