Michael on March 20th, 2008
Bookmark and Share

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.

Thoughts on borrowing from Mom and Dad vs. the bank? Anybody done so? How has it worked so far? Did it change the relationship? For better or worse?

Bookmark and Share

One Comment to “Borrowing from Mom and Dad vs. the bank”

  1. Many of us came into the situation when we needed to borrow the money. Not all of us has the chance to chose from who to borrow. Borrowing from bank has clear rules. People monthly pay off a debt. Bank takes interest on a loan. In other hand, many of us think to borrow from your parents. Definitely it is cheaper alternative. But it depends on how much will ask your parents for a loan. Or what else they will want as a compensation. Moreover, it can change the relationship in a family.

Leave a Reply

You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>