What interest rate would you charge your family?

izools · 24 December 2011 at 11:38AM

chattychappy wrote: »

To answer the question without getting into the rights/wrongs of it, I'd go for something like base rate + 4.5%. That would start you off at 5%. It would massively reduce her interest bill and mean that most of her payment to you would be reducing capital rather than just going to interest. At the same time you're not losing out either (except in terms of risk).

You've always got the option to waive interest later if times become even harder for her.

Some years ago I offered my sister a similar deal. She thought it too harsh. So I offered her base -2%, but rising 1% each year. Ie :

Year 1: base -2%
Year 2: base - 1%
Year 3: base rate

etc.

She was free to repay as much or as little as she liked, provided she paid at least the interest.

12 years later, she rather regrets not taking the original offer. To her credit she is still keeping up with the interest - now running at 10.5%.

Unfortunately, however, this doesn't address the cause of the problem -

Lack of awareness of ones means, and a lack of willingness to implement the changes / control necessary to live within one's means.

CLAPTON · 24 December 2011 at 11:38AM

I owuld suggest a cautious approach

firstly cut up the cards

then maybe pay off one of the cards with the highest APR with your money; she can pay you back the money a suitable period

then monitor the situation for 3 months and review progress (i.e. are thge debts actually going down; any new debt being taken on etc)
sadly there are many ways of getting credit even if CCs are cut up (OD, store cards, catalogues)

Wutang_2 · 24 December 2011 at 11:39AM

£10k on clothes! I agree with happy man, set your mum (yep - your own mum) a base rate + 4.5% or maybe offer her (yes, still your own mum) the reducing rate. In fact, as its your mum, don't give her a penny..." What interest rate would you charge your family?" WOW WOW AMAZING WOW

hayton2k3 · 24 December 2011 at 11:40AM

berbastrike wrote: »

The reason is simply my Mum spends a lot of money on things she can't afford.

WE have agreed that she will cut up all the cards and never get another card so hopefully no other debts like this again.

And then the expiry date passes and a brand new card lands on doorstep and she spends the 10K she has on cards now since you paid it off

Happy holidays.

Nah charge as little interest you can. Obviously don't miss out on what interest you could earn in an account. Think of what she would charge you and go from there.

Wutang_2 · 24 December 2011 at 11:46AM

hayton2k3 wrote: »

Obviously don't miss out on what interest you could earn in an account. Think of what she would charge you and go from there.

I am seriously out of touch....

opinions4u · 24 December 2011 at 11:58AM

I wouldn't charge my mother a penny in interest.

She's given me so much more than money over my lifetime.

one_hot_minute · 24 December 2011 at 12:06PM

I personally wouldn't take any money off my mum but i can understand you wanting to protect your cash. You're not talking a few hundred pounds. What interest rate is the money earning at the moment? If you must charge, why not simply charge what you would lose rather than profit from it?

System · 24 December 2011 at 12:13PM

It earns 3.2% via Halifax ISA. This £10k is basically all of my balance, I don't have £50k or anything sitting there.

andrew-the-cat · 24 December 2011 at 12:24PM

I would never consider charging interest to family members, especially not my mum. She has leant me money before (for a car) and didn't expect me to pay interest.