Borrowing money from Family

spdavies

Hey folks,

I'm about to buy a new car for which i need to lay my hands on around 5k.

I have an option of getting a c.card or a loan to fund the shortfall but i also thought about borrowing from my Dad who has some spare savings knocking about.

My theory is that if my Dad works out how much he is likely to earn from his current 5k in savings (likely to be low) over 3 years and i pay him back that same amount then we keep the money in the family and no-one loses out?

However, he has previously given me £5k this FY and is under the impression that he is limited to £5k as a gift to avoid the tax man (capital gains or inheritance tax) gettting involved.

Can anyone out there reassure me or have any words or wisdom as to whether this is a good idea or not?

thanks!!

tonyh66

thre is an entire universe on the forum regarding lending money to friends and family, don't let your father read it for your sake.
Regarding the tax man I don't think there is any problems with the arrangement, I think he may be trying to get out of it without hurting your feelings

opinions4u

You should both read this.
https://forums.moneysavingexpert.com/discussion/76953

As for IHT, he can give as much as he wants whenever he wants. If he croaks within 7 years there may be a tax liability on it payable by his estate. Not you.

Apples2

If ye hasn't got any of the 5k back he has already given you this year, what chance does he have of getting the addtional 5k back?

Not aimed at you OP, aimed at your father.

Niv

Do not borrow from or lend to family / friends. It will in many (most imo) end in trouble / split families.

and specifically to OP a 'shortfall' of 5K?? Re adjust your priorities and buy a cheaper car as you clearly cannot afford this.

Niv

R_P_W

So he hasnt offered to lend you the £5k? It is your 'idea'?

So the first £5k was a gift and not a loan? Or is he expecting this back?

Your not keeping money in the family because you are going to spend it and buy a car. I would say that your dad loses out - he can leave this money in the bank and get the interest no problem, or he can lend it to you and risk not getting it back? Apart from the fact that you are his son and he might want to help you out - why would he?

debtcutter

The opinions on here about lending to family are sometimes so strong.

I get the "don't lend to your mate from the pub that you think you can trust" argument, but if the only reason not to lend to immediate family is that they may not pay you back, then the advice should surely be don't lend money you can't afford to lose. Not don't do it. IF you do it on that basis and they lose their job and can't afford to pay you until they find a new one, what's the problem?

If it's a question of them going to their bank for £5K they can barely afford to repay, I'd understand, but this is lending £5K out of savings.

somethingcorporate

£5k that they may never see again - hardly a small sum of money.

kuohu

You are an adult with a young family, you should be standing on your own two feet and cutting your cloth accordingly.

Mojisola

spdavies wrote: »

My theory is that if my Dad works out how much he is likely to earn from his current 5k in savings (likely to be low) over 3 years and i pay him back that same amount then we keep the money in the family and no-one loses out?

However, he has previously given me £5k this FY and is under the impression that he is limited to £5k as a gift to avoid the tax man (capital gains or inheritance tax) gettting involved.

If he's thinking about inheritance tax, the amount is £3k per year, not £5k - https://www.guardian.co.uk/money/2007/oct/25/inheritancetax.tax

Was the original £5k definitely an outright gift or was he expecting you to pay it back?

If the first £5k was a gift and you are both happy to put the loan agreement in writing, it may be worth doing. We've done it in our family. The lender gets a higher rate of return than they would from savings and the borrower has reduced charges.

Most problems arise when people lend/borrow money with just verbal agreements.

margaretclare

If it was possible to contact your Dad directly I'd say - no, no, no!

How do you know he won't need his savings? You say he has a 'spare £5K' as if it was nothing, you already owe him £5K. If I could speak to your Dad I'd remind him that 'a fool and his money are soon parted' and that applies notwithstanding years and life experiences which should have taught him the truth of this.

If it was something life-threatening it would be a different ball-game, but a new car?? There are people/organisations out there whose business it is to lend money - have you tried them first?