While you can give an interest free loan to a family member, financial planners don’t endorse this practice. To minimise pain and conflict, financial planners advise charging interest on the loan, treating it like any other loan. A minimum amount of interest for example, is an amount that will ensure that repayments keep up with inflation. Putting together a contract such as Credi’s loan agreement that leaves out any room for assumptions. Giving an interest free loan to a relative or friend might also fall under the tax definition of a ‘gift’, which has its own rules and regulations you would have to check for your locality.

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