lending money

[Carnos Jax]

Well said Wailer...

[tortoise]

GGD wrote:
[quote=graylocks]
if you don't set a rate and the gov gets involved they may tax you for the interest you SHOULD have made. you can google how to determine the lowest rate possible. given how piss poor savings rates are you could probably set the rate pretty darn low.

Maybe use 13 week T-Bill rates as a starting point for the going rate for interest (about 0.06% now, that would be about $60/year on $100,000), that's what the government is willing to pay if they borrow money from you.

http://www.treasury.gov/resource-center/...=billrates
Actually your decimal point is off, the amount would be $600 not $60, still rather pathetic for $100,000 investment and why I got out of T-Bills years ago.

[Janit]

graylocks wrote:
to protect both of you IRS-wise: write up loan paperwork at a minimum interest rate. then, if you truly don't want the interest you can gift it back to your friend.

if you don't set a rate and the gov gets involved they may tax you for the interest you SHOULD have made. you can google how to determine the lowest rate possible. given how piss poor savings rates are you could probably set the rate pretty darn low.

i've done a number of projects in my life with person to person loans with friends and supporters. they were all paid back in full. some were simply forgiven after a few years of payments and were low enough to be under the gift threshold. but i always did paperwork in case the IRS came a calling.

Ditto. Write out the terms of the loan clearly to minimize any possible misunderstanding of the terms should problems arise. The first test of whether this is a good idea is to see if the two of you can negotiate a contract that is acceptable to both of you.

[GGD]

tortoise wrote:
Actually your decimal point is off, the amount would be $600 not $60, still rather pathetic for $100,000 investment and why I got out of T-Bills years ago.

You might want to double check your math, 100,000 * 0.0006 = 60. It really is an interest rate of six hundredths of a percent. In order to get an interest rate closer to 0.6% (0.006) to get around $600/year on $100,000, you would need to invest in 5 year notes rather than 13 week.

http://www.treasury.gov/resource-center/...data=yield

Or maybe you were thinking this was on $1,000,000. That might require a really, really, really good friend.

[graylocks]

years ago when studying Latin I translated this passage from the Hesiod which became a rule I have lived by: Let the rate between friends be fixed. Even with your brother smile - and get a contract. For trust and mistrust alike breed ruin.

[mattkime]

space-time wrote:
[quote=mattkime]
bogleheads.org

standard answer these days
its a tad frustrating because those guys are the kung fu ninjas of investing. not in a "get rich quick" way but "being smart about your money" way. which doesn't mean I ALWAYS take their advice, but its very valid.

I'd expect someone over there to provide a link to a basic loan contract. done and done.

[rgG]

mattkime wrote:
[quote=space-time]
[quote=mattkime]
bogleheads.org

standard answer these days
its a tad frustrating because those guys are the kung fu ninjas of investing. not in a "get rich quick" way but "being smart about your money" way. which doesn't mean I ALWAYS take their advice, but its very valid.

I'd expect someone over there to provide a link to a basic loan contract. done and done.
Try this:
http://www.buzzle.com/articles/loan-agre...plate.html

[mattkime]

rgG wrote:
Try this:
http://www.buzzle.com/articles/loan-agre...plate.html

i take it all back!

[graylocks]

be sure to specify whether interest is simple or compound. my lenders were always satisfied with simple interest.

[Wailer]

Using that preprinted form is good as it looks like you aren't being usurous or one-sided. Just direct that link to your friend and see if he'd be willing to fill it out even with terms that favor him, ie 0% interest, no fees on late payments, etc. If he even balks a little bit, I probably wouldn't loan him anything.

Remember, you can't draw blood from a stone so having a signed agreement doesn't by guarantee you'll get repaid even if you go to court to enforce it.