Should I charge interest on a loan to my sister?

[cptacek]

I suggest you think long and hard about this before you do it. Why will the bank not give her a loan? They know she is not likely to pay them back.

We purchased a $400 water heater for a my grandmother for Christmas. My sister and I agreed to go half and half. My sister only had $100 and said she would pay me the other half when she could. I said sure.

About 6 months went by and I never brought it up but every time I spoke to my sister I had it on my mind. Finally I asked her and she more or less forgotten. I felt like a real ass having to ask her for what she owed me. I felt even more rotten for having that cloud over my head every time we talked.

And understand I am only talking about a petty $100. I've given more than that away since then, but that didn't matter, because she was en-debted to me. It's just a really rotten thing I hope you avoid.

There are 9 of us kids in my family, and we all go in together to get Mom and Dad Christmas presents. I've carried various siblings for a few years before they can pay me back. But, I have a list I keep with me, and when we decide what we are going to get, I write all their names down and when they pay me, I pull it out and mark them off. It is kind of a joke: "don't borrow money from cptacek, she has a list!" So, sometimes they forget, and that's ok, because at some point the list is going to come out and we'll get it then!

One sister owed me about $250 from various gifts over the past few years. Her and her husband were always behind on the bills. They are separating, and she has really pulled it together. Saved and bought a $2000 car with cash, payed off all the credit cards in her name, saving up for an apartment (she and her daughter are living with some church friends for now), just really doing good. And she texted me and asked how much she owed me. I looked at the list and immediately texted her back. Then, I realized that looked like I had been stewing over the debt (which I hadn't) and made another joke about it. She was so proud to be able to pay this debt off, and she felt better once it was done. Good for her!

I've lent money to family before, with interest and without interest, I've declined lending money to family before, I've given money to family before, I've paid family for helping me with various home improvement projects and I've not paid family for helping me with other home improvement projects. I've been in business with my father and I'm in the process of ending that business relationship (due to good things, not bad things). I don't think there is one set answer. It depends on your relationship, how responsible the other person is, how much you are depending on getting that money back and if you would bring it up every time you see them.

[Like2Plan]

Never loan money to a family member, and if you do.....don't charge interest.

If you want to help her out, make the money a gift.....NOT a loan.

I agree with Angio333. Sometimes folks loan money that they really can't afford to loan to other family members. When the family member defaults, it puts them in a real bind. If you think of it as a gift, you realize more quickly if it is something you can truly afford to do.

[amarowsky]

I'd say it Depends on relationship and your financial standings. If you can afford it, i would say make it a gift sounds like the best option.

[LuxLiving]

I've found that I personally am not a good lender. I have hard feelings when someone who owes me money goes out splurging on other things rather than paying down their debt - even when they are current on their payments (irrational I know, but that's how I FEEL)...so for me, since I make a cranky lender, I choose to no longer make personal loans. I think it's not just about your sister, part of the equation is how you will feel as she goes about paying you back AND buying other things while still owing you money.

And yes, I'd charge her interest. If she cares about you she's going into it knowing you're losing money by pulling it out of your bank and want the arrangements to be fair to you as well.

[b4freedom]

Don't do it!

It's better that they settle the debt.

What makes me mad about hospitals/insurance is when I went in for an emergency and got a bill for $15,000 and my insurance company who paid $3,000 and it was considered "paid in full". Basically, people without insurance would be stuck paying $15,000 and people with insurance pay the copay while their insurance company pays $3000. How is that fair?

[srblanco7]

Give it to her (if circumstances allow). If she insists on a loan - then certainly no interest - and go into it assuming you'll never see the money repaid.

[SSfree]

Borrowing from Siblings

Hi All,

this is down to my personal experience. I am married and my husband was stuck with some financial issues. I am not a oerson who would like to borrow from anybody but I borrowed money from my brother. As a help to younger sister, he helped me and was very pleased that he supported me on my bad time.
when my circumstance changed within 2 years or borrowing I asked my brother about the total I borrowed so I could repay him. Now things cnaged from here, as full of clear heart I accepted the figure he told me which was about £6500.00. I also had another £950.00 to add on it. I repaid him this amount in one lumpsum as we were much better off. I remember I was so stress and had several arguments with my husband as I used to feel very bad for my brother. I couldn't take it that for me he is under pressure. I was anyway happy I could repay all in one go. This debt was cleared in one go. Now I also assured my brother that I will repay him any interest as I didn't wanted him to go through any losses cause of me. later another year I became even better off financially as we had good jobs and earned good returns on some of our investments. This point I asked my brother several times to give me accurate figure of interest so I could clear it off. I didn't hear anything from my brother for days. Later as I was keen to clear, (real reason was, he himself once phones me and reminded me that he wants interest which he paid bank as well as my mum said me once that, what's their profit as me and my husband made profit on certain investments)his interest as it was stressing me out and didn't want me have wrong tag for being selfish.

later when I heard nothing from my brother I phoned him and asked him I would pay him £2000 as interest. He didn't agree or refuse. I paid him this money. Now I was all clear and free from all debts I borrowed from him. Later one day I sat down to work out how much interest I paid him, I realised I paid him more than double of what he borrowed from bank. Sad part is he never ever confronted me that I gave him more. I was under so much of pressure to clear his debt. I also like to add that , when I visit him I buy expensive stuff for his kids and him but he never ever I bought anything for my kids ever or even took a day off while I visit him. even if I pay taxi fair back to him he takes it back without any discomfort.

my conclusion to this is, I know my brother helped me in bad time and I had that in my mind so I was so desperate to clear not just his capital but interest but now I see he had taken undue advantage of my faith. if he would have just asked for extra money I would give him straight away. And also like to add that when he ask me to buy stuff for him he doesn't even offer me money for the expensive item I bought for him.

This world is very smart. there is no place for trust. one side I feel I hope he realises it on other side I feel he is ignoring this as he is at advantage. He things I don't realise it but yes I know it all but I am waiting for right time.

from my experience, I will never ever borrow from siblings or if they borrow bot other sibling but I would charge my brother with interest atleast same as bank if not double. This has changed my views about him since then.

[DaveInPgh]

[GoodSteward]

If you need to post something on your mind you can reference a thread, but start a new one to reflect any current situation you are in. I'm locking this one.