Money Moral Dilemma: Should I pay my parents interest?

Joseph24

Wow this seems harsh! I lend my kids money but don't expect them to pay more interest than I could get in building society, viz 1%. You could work out what historic rates have been and calculate what the interest would be and they tell them you are giving them that as 'a gift' so they don't pay tax on it! I can see even doing that is beyond what you feel you ought to do but is a possible compromise

Whatever you do one party is going to feel mad, and I guess you have to decide who you DONT want to alienate, your partner or your parents and act accordingly. You don't say how you get on with your parents, and if you really aren't bothered then just repay the balance and live with it. The consequences are maybe more important to consider than the 'rights and wrongs' of the repayment issue

[Deleted User]

Hi,

andrewbarnes wrote: »

The terms said £60 PER MONTH, which is £720 per year, or £7,200 over your suggested 10 years - hardly minimal!! £60 per month is over 10% per year, which seems extortionate as "interest".

That said, I agree that terms should have been agreed up front - it depends on parents' current circumstances.

as we don't know the term of the loan, nor the interest rate it's all speculation.

It maybe wasn't all interest, perhaps £30/40 each month was to pay off the £7000.

warehouse

Maybe it's just me but charging your own children interest wouldn't even enter my head.

Mojisola

warehouse wrote: »

Maybe it's just me but charging your own children interest wouldn't even enter my head.

If you have plenty of spare money, that's fair enough.

Not all parents do.

Apart from the obvious thing that everything should have been put down in writing before the money was handed over so that both sides understood the terms, I wouldn't have accepted a loan from my parents without at least repaying them the interest they were losing.

The loan would still be cheaper for me - why should my parents lose out while doing me a favour?

Teacher2

It is always best to agree the exact terms of a loan agreement before you start it but that is not possible now. Your parents are being unreasonable in demanding interest they hadn't made clear they would want but the relationship is worth much more to you than the the cash, I presume. In this situation I'd say that the thing to do is pay up and never enter into any financial arrangement with them again. I am sure your 'dream house' has appreciated probably even more than the interest your parents are asking for and it might be that they will be able to leave you an inheritance.

Older people were not always taught to be empathetic and tactful (their parents were high handed and rude to them) so it might not be malice which motivates them and they also might not realise that it is not acceptable to act in their way they are doing. Also, they might be a bit short of cash in their older age.

I should pay up and remember that they are not going to be on earth forever so it's worth making the most of every day you have them.

That said, you are in the right and they are in the wrong so let that comfort you as much as it can.

Pollycat

warehouse wrote: »

Maybe it's just me but charging your own children interest wouldn't even enter my head.

Perhaps it all depends on the partents' financial circumstances.

If they could put the money in a fixed term bond or ISA and get a couple of % interest and that interest is money they need, why should they be financially disadvantaged by not charging interest?

If the (fictitious) parents didn't mention charging any interest to the (fictitious) child at the time of the loan, that's their fault.

I don't believe for one minute that a loan would have been made without discussing the parents' expectations about repayment.

Bonjour13

I presume the parents will be aware that they must declare this "interest" to the taxman as additional income?

fairy_lights

I hate these money moral dilemmas, the answer is always "it depends on the circumstances" which we never know because so little information is provided.
I do think it would be incredibly tight for parents to charge their children interest though.

Mjkpio

Interesting one, I'm going to be in this situation myself soon but will ensure all "terms" are laid out clearly, however awkward it may be.

In order to afford our first house we'll probably be needing some help and my parents have offered a significant sum as a 0% loan with the intention of using what we pay them back as a monthly retirement income (they did the same with my sister). We'll be making it 100% clear that it is £x amount of X years at X% interest and get it signed!

Mojisola

Teacher2 wrote: »

Older people were not always taught to be empathetic and tactful (their parents were high handed and rude to them)

Off topic - but what a weird thing to say!