Last week, I had the wonderful opportunity to chat with Shelly Banjo, author of the “Starting Out” Column for The Wall Street Journal. We discussed the intricacies of tax and gift law when borrowing money from your folks at below-market interest rates. I’ll spare you the arcane details and cut to the chase: the law is confusing cumbersome and, like many others, provides plenty of planning opportunities for those willing to take the time to do it properly. If there’s interest, I’ll go into further one day soon.
But the laws turned out not to be the focus of the WSJ article. Instead, Ms. Banjo focussed on some of the larger issues like should you even ask Mom and Dad for the loan and considerations for paying the money back.
It’s a brief but insightful article, so check it out.
Of course, not everyone can choose or does choose to borrow from the ‘rents. Some choose that plastic in their wallet. Also this week I was quoted in CreditCards.com’s report about Tuesday’s lowering of the Federal Funds rate. I explained that this rate cut won’t matter much to the average credit card borrower who isn’t already making paying off his loan balance a top priority.