Published on May 4th, 2014 | by Falcon


Is Family loan a Good Option?

Considering high interest rates and the need to wait to get approved for loans, the borrowers tend to think that family loan can be a good idea. It can be so, if you consider the offer as you would do with a traditional loan from a bank or other financial institutions. Family loan is the offer of financial support from any of the family members or friends. The purpose of the loan is not an issue and so there is no specific term for the loan. It is generalized as a family loan as the lender is not a bank or other financial organization.

How to make the deal a success?

The family loan must be drafted professionally. The loan must be a good offer for the lender and the borrower and should be in compliance with the tax laws and general local laws. It must be a win to win situation for the people concerned. It is wiser to consult a tax professional to ensure that the deal is subject to all the rules. The lenders should not hesitate to charge the AFR (Applicable Federal Rate) for the offer and the borrowers should be specific about repaying the loan as specified. Visit out websites and Forgiving of the loan dues or the payments will create unnecessary problems and will stain the relationship.

The family loan is not just a business transaction. Personal issues should not be allowed to complicate the deal. To maintain a healthy relationship, the deals should be smooth and without any problems. The problems could be avoided if both the parties concerned are transparent in their dealings. It is not necessary that your purposes for the loan should be exposed. You need to be specific about your requirements and the term of the loan so that the lender can understand if he can spare the loan amount till you repay.

If you are not able to repay as specified the lenders should be able to face the loss. As a borrower, you should do your best to return the money as agreed. If you can provide some collateral for the loan, you can entitle the lender to dispose your property in case you are not able to repay the loan as specified. You must be prepared to lose your asset if you are unable to settle the loan. As a family member, the lender may hesitate to dispose your property to recover the funds. In that case, you should take the initiative and settle the loan by disposing your property.

Formal documentation is necessary to make the family loan a success. All the terms should be drafted as in a traditional loan. Online sources help you draft a formal document for a family loan. If you are not able to do the deal by yourself, you can consult an attorney and make the process smooth. With a proper document, you can avoid possible embarrassments. The family loan is one of the offers overlooking the credit history of the borrower. The interest rates are low and the terms are highly flexible. With a good intention, you can borrow the loan to satisfy your needs and show your gratitude to the lender by clearing the loan at the earliest.

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