While loans can be made between family members – a family credit contract – this form can also be used between two organizations or companies that have a business relationship. The loan agreement should clearly state how the money is repaid and what happens when the borrower is unable to repay. A simple loan contract describes the amount borrowed, whether interest is due and what should happen if the money is not repaid. While interest rates may conflict with the original intention of offering the loan to a family member, they are a necessary evil to maintain professionalism. First of all, like all other institutions, you will be doing your money a favour by calculating an interest rate, because it would have earned a decent interest if it could have been used in a different way. In this way, you can compensate for any losses that may occur during the term of the loan. However, it is important not to set credit limits beyond the IRS thresholds. This is because you have to pay a tax as soon as that threshold is reached. To avoid this, use the current federal tariff, which is offered directly by the government. This will not only ensure that you get a decent interest rate, but also, you will not be subject to any form of taxation. In the event of a default, a written agreement can help prove to the courts that you were waiting for a repayment and intend to enforce the debt repayment. In general, when granting credits. You should only borrow the amount you can afford to lose.

You should not avoid breaking the bank on the money you had saved for your college fees. In many cases, family credit is a success – but success requires a lot of conversation and open planning. You have to deal with administrative issues and the emotional (perhaps more complicated) side of things. You also need to navigate through potential financial and legal pitfalls. Considering that both parties agree to respect and comply with the commitments and conditions set out in this agreement, ☐ the loan is guaranteed by guarantees. The borrower accepts that the loan is repaid in full by – Many consider a handshake between family members to be an enforceable contract. But for the IRS, they believe that money transfers between family members are gifts, unless there is evidence that comes in the form of a family credit contract.