Interest on a loan?

nickij_2

As I'm no financial expert, I would really appreciate some help from someone who knows more than me (not difficult!).

18 months ago a relative of mine desperately needed to borrow some money (the bailiffs were at his house when he phoned.) I had some savings so lent him the £1040 that he needed. (I had scraped the money together and it was all we had.) He said he would pay me back with interest when he could.

He has sold his house and asked me to work out what the interest would be on the loan. I would normally say - don't worry about it, just give me what you owe me, but he has treated me like a mug, to be honest. He never mentioned it again until I asked him to sort out a repayment plan (after 9 months) and he said he couldn't afford to till he sold his house. He then proceeded to go on several long weekend breaks, spent a fortune on Christmas presents (£150 each dd), eat out every weekend, replace mobile phones his dd KEEPS losing (£100 phones!) etc. All the while he has no idea what MY finances are like and whether I need MY money back (sorry, rant over!)

So - IF I ever get my money back - how much do you think is fair for interest!

Bean_Counter

I would say 8% over base. We use that at work.

At the risk of being negative & cynical (hey I am an accountant), as you have no contract, just make sure that you get something back out of him, as given what you said, I would be worried about seeing any money. Especially if he is moving house.

lynzpower

I would say 5-6% TBH.

O8% is very generous and no bank accounts really give that (unless you are talking regular savers)

Errata

5% sounds about right, but to be honest if you want your money back why not suggest he pays you back the whole lot within the next 4 weeks and you'll forget about the interest. The relly isn't good with money so you might want to tell them how you'll proceed if you don't get your money back.

skint_spice

I'd be tempted to agree with Errata - the important thing being you see your money again! He doesn't sound the most reliable and if you offer the cheapest option he might just pay up!