Borrowing money from Family

margaretclare

PS: I mentioned this to DH, who has many years' experience of dealing with money and also many years' experience of dealing with the fall-out of family problems.

His take on this is: if your Dad is offering, freely and without persuasion, if he is daft enough to do this given that you already owe him the same amount, then from your point of view, it's a good deal - grab it with both hands.

mumps

margaretclare wrote: »

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?

I read it as the first £5k was a gift. Some families might have problems with this sort of thing, others won't. We have been in a position to help our children with loans for things like a house deposit or car. Never caused any problems, always paid back.

arbroath_lass

debtcutter wrote: »

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?

Try reading this thread https://forums.moneysavingexpert.com/discussion/4278665

The OP on this thread is by no means alone - this is just the most recent one I remembered.

molerat

I am on the other end of a family loan. I have just lent my son £7.5k for a car. He had finance set up but was at 12.7% apr whereas I am charging him 3.4% apr with the money coming out of my 3.3% instant access savings account . My spreadsheet shows I will make about £20 out of the deal over 3 years due to rounding the payments to whole £s. Works out at £30 per month less for him to fork out. He has just had a promotion which after tax is more than the payments. Unlike many our family has implicit trust in each other and the only way he would default was if it was totally impossible for him to pay. I have done it for him before and he paid up well before time. If he was a druggie / gambler / !!!!-head / waster then it would obviously be completely different.

Jim_Jupiter

If this is your idea and so far dad is none the wiser you plan on getting your hands on 5K of his money then I implore you not to ask. He's your dad, so he won't say no, but there is no guarantee you'll be able to pay that all back over whatever agreed time frame you had in mind. This will really put your dad out and may destroy your relationship with him. I appreciate on paper your plan is flawless and avoids you paying over the odds in interest - however that relatively paltry sum in interest is worth it for simply not putting dad on the spot.

If or When you struggle with repayments on a REAL loan, I'm sure your dad can lend you a smaller sum then to help you out.

And if you must do this plan - don't insult him by offering only what % interest he gets in his savings account, give him a real reason to almost certainly lose a big chunk of 5 thousand pounds.

margaretclare

Jim_Jupiter wrote: »

If this is your idea and so far dad is none the wiser you plan on getting your hands on 5K of his money then I implore you not to ask. He's your dad, so he won't say no, but there is no guarantee you'll be able to pay that all back over whatever agreed time frame you had in mind. This will really put your dad out and may destroy your relationship with him. I appreciate on paper your plan is flawless and avoids you paying over the odds in interest - however that relatively paltry sum in interest is worth it for simply not putting dad on the spot.

If or When you struggle with repayments on a REAL loan, I'm sure your dad can lend you a smaller sum then to help you out.

And if you must do this plan - don't insult him by offering only what % interest he gets in his savings account, give him a real reason to almost certainly lose a big chunk of 5 thousand pounds.

Couldn't agree more.

Maybe DH and I, jointly and separately, have seen too much of what *can* happen within families, and it can be far more unpleasant than what happens in the dog-eat-dog business world.

spdavies

Firstly thanks for all your views.

Secondly wow - calm down a bit. I have an excellent relationship with my Dad and have absolutely no intention of not paying him back with the appropriate amount of interest. I see him every day so its hardly like i am going to run off with his money!!

The first £5k was a gift following the death of my mother to avoid him keeping it all and then getting hit for inheritance tax down the line.

This second £5k is perfectly within my means to pay back - i just don't have the capital at hand so i thought a loan within the family would make more sense than getting hit by high interest rates. If i repayed the right amount he could get more than he would in his current savings account too!

Mojisola you mention the 3k per year for inheritance tax. Is that per person? i.e. could he give £3k to me and £3k to my wife (and perhaps even children).

Just to be clear - my Dad is looking to offload some of his savings to avoid getting hit with a massive inheritance tax bill (like his Dad did) and we have spoken about this so i am certainly not stitching him up!!

Thanks again all

somethingcorporate

It's a bit rich telling people offering you reasonable and reasoned responses to calm down.

If you only wanted people to pat you on the head you should have asked your spouse. If you want reality just have a read of the horrible stories of families being destroyed for lending money.

We don't know you and can only provide advice on our experiences and those that we see TIME AND TIME again on these boards where close families have been blown apart by the lending of small sums.

If you dad is looking to offload capital for IHT why would you be paying it back?

It's your family at risk so really no-one here could give two hoots aside from you but if you didn't want opinions that didn't go with what you wanted you shouldn't have posted on a public forum.

Jeez - some people are so bloody ungrateful.

easy

your father won't get hit with an inheritance tax bill, but you (and his other beneficiaries ) might, it would be taken out of his estate before the estate was divided up between you, IF his estate is worth more than £325K in total.

If he wants to avoid leaving enough money to attract inheritance tax, then HE should live a little. Spend some of the money, go on nice holidays (he could take his son and family with him if he wanted to), buy himself a nice car - maybe he could leave it to you when his time comes ?

If he wants to give you more money, then he can, he can give up to £10600 per year to you, without you needing to pay 'capital gains' tax on it.
See this page http://www.hmrc.gov.uk/cgt/intro/gifts-inherit-divorce.htm for for info on capital gains tax, and inheritance tax.

Mojisola

spdavies wrote: »

The first £5k was a gift following the death of my mother to avoid him keeping it all and then getting hit for inheritance tax down the line.

Mojisola you mention the 3k per year for inheritance tax. Is that per person? i.e. could he give £3k to me and £3k to my wife (and perhaps even children).

£3000 per year is exempt from inheritance tax. If your father gives more and then lives for seven years, that amount will be exempt. It's worth reading up on the tax - https://www.hmrc.gov.uk/inheritancetax/intro/basics.htm.

Your father's estate may benefit from any unused portion from your mother's estate.