loan calculation

chriswaller1990

hi all,

In 2010 I borrowed 10k from my brother and he now needs the money back. I am in a position to do so so am happy to repay his gratitude.

he say that he would like to charge interest at the BoE base rate.

If I agree, which seems fair, what does this make the total amount.

Sorry I am a little dense when it comes to sums, even basic ones!

Thanks

HappyMJ

Depends on if you are going to compound the interest and how often.

A bank would normally charge interest to the account monthly.

BOE Base rate is only 0.5% so 4 years simple interest would be 2% and therefore an extra £200.

PeacefulWaters

HappyMJ wrote: »

Depends on if you are going to compound the interest and how often.

A bank would normally charge interest to the account monthly.

BOE Base rate is only 0.5% so 4 years simple interest would be 2% and therefore an extra £200.

Even compounding annually, it would be £201.51.

The brother should declare it as income for tax purposes. Officially.

[Deleted User]

I think 0.5% (the current BoE base rate) would be a bit stingy.

To give you an idea of the sort of interest you would pay, on a proper bank loan, 5% APR (which is a pretty low rate), would add up to 1,054-06 interest over 4 years, and that's based on paying monthly, rather than all at once, at the end of 4 years.

thebritishbloke

Bedsit_Bob wrote: »

I think 0.5% (the current BoE base rate) would be a bit stingy.

To give you an idea of the sort of interest you would pay, on a proper bank loan, 5% APR (which is a pretty low rate), would add up to 1,054-06 interest over 4 years, and that's based on paying monthly, rather than all at once, at the end of 4 years.

I agree with this.

If you can afford it, I'd pay him at least £500-1000 as interest as a thank you gesture.

ViolaLass

Bedsit_Bob wrote: »

I think 0.5% (the current BoE base rate) would be a bit stingy.

But suggested by the lender, not the borrower.

thebritishbloke

ViolaLass wrote: »

But suggested by the lender, not the borrower.

When you've loaned a large sum of money from a friend/family member, it's nice to thank them for trusting you etc.

ViolaLass

thebritishbloke wrote: »

When you've loaned a large sum of money from a friend/family member, it's nice to thank them for trusting you etc.

Don't disagree but brother may not want much money. I didn't when I lent to family member - they needed it more than me. I just wanted my money back and to know that I'd helped. You don't always have to say thank you with cash.

bris

Family is different, I too wouldn't want interest and it's what families are supposed to do, be there when needed etc.


It's between the OP and brother, whatever they decide has nothing to do with anyone else.

paddyrg

Maybe the BoE base rate isn't the best rate to use, maybe add a little for other cost of living rises - how about pay back and throw in a damn good weekend away for either him and his Mrs, or take him for a brothers weekend

thebritishbloke

ViolaLass wrote: »

Don't disagree but brother may not want much money. I didn't when I lent to family member - they needed it more than me. I just wanted my money back and to know that I'd helped. You don't always have to say thank you with cash.

bris wrote: »

Family is different, I too wouldn't want interest and it's what families are supposed to do, be there when needed etc.

It's between the OP and brother, whatever they decide has nothing to do with anyone else.

I agree that you don't want interest when you lend to family. I regularly lend money to friends/family and just ask they pay me back what they borrowed within a fair amount of time, they almost always pop interest on. I.e. If I lend a friend £200 for a week, they give me £5. That's like a 3000% APR, but it's just a nice thing to do.

I agree, it's completely up to them, but when you're the borrower you should appreciate/respect that they've lent you a large sum of money for a long period of time and show them that you're thankful for it.