Loans From Relatives
Categorized: Debt Consolidation Loans | No comments
Loans from Relatives
Borrowing money from relatives can be a wonderful solution to your problem—or a disaster. You can often borrow money from a relative at an interest rate that’s far lower than what you can get from a bank. The interest rate you offer to pay your relative on the loan will typically be higher than she could earn by parking her money in a bank account or conservative investment, so she will benefit as well. Best of all, you don’t have to pass any credit checks.
If you and a relative do decide to strike a deal, be certain she understands your financial situation. You should be up front about your debt load and, if possible, sign a contract agreeing not only to the terms of the loan, but also to rid yourself of all other debt until the loan is paid. Be businesslike about the loan. If you are not, you are likely to fall into the trap of not taking the obligation seriously and might be tempted to continue to take out other cards and continue to buy on credit.
If your relative generously decides to cancel the loan later, be careful. The IRS considers “forgiveness of a debt” taxable income, and you may have to pay taxes on that amount. Be sure to talk to an accountant.
This post was tagged with: credit card debt, credit card debt consolidation loans, debt consolidation loan, debt goals, debt plan
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