What interest rate on family loan

[AndyC_123]

Hi

Have the opportunity to buy some agricultural land, however we can't afford all of it as quite a lot of money tied up in livestock at the moment.

By chance, a family member is looking for a safe place to put circa £200k after they've sold off some other land.

What would be a fair interest rate to pay them whilst paying the money back (over 3 or 5 years for example).

Cheers

[bogie]

Maybe a couple of percent above inflation? ...so they are not losing money and getting similar to a poor rate bank account....like most these days. They shouldn't be worse off from lending to you.

[The Moose]

Don’t do it.

But if you do, commercial rates, commercial terms, no arrangement fees.

[WhiskyDisco]

10% per annum interest payments, paid monthly, then pay back the principal after a defined period.

[agent006]

How close family?

[ATG]

WhiskyDisco said:

10% per annum interest payments, paid monthly, then pay back the principal after a defined period.

10%? Are you the relative ;-) ?

OP - what rate would you get commercially? Speaking from a position of complete ignorance I'd have thought agricultural land would provide very low risk collateral, so, assuming you could put some cash into the deal so that the lender is over-colaterslised by a reasonable margin and you can show you're generating some income, I'd have thought you'd get offered a pretty low rate. I'd offer the relative that or a fraction more, in effect splitting the fees you'll avoid.