A lot of people will agree that it’s a terrible idea to loan money to friends or family—it can lead to some ugly issues. However, if a loved one is in a bind and you’re thinking of doing it anyway, here’s the case for charging them interest.


It might feel wrong to charge interest, but as Business Insider explains, not charging them could get you in trouble with the IRS. For example, the IRS may charge you taxes for interest you could’ve collected on the loan. Business Insider explains:

The annual limit for tax-free gifts to individual family members is $14,000, so especially in situations where your loan is going to tip you beyond that point, the minimum interest you’ll want to charge is the IRS Applicable Federal Rate. Those rates currently amount to 0.68% for “short-term” loans of up to three years, 1.33% for “mid-term” loans from three to nine years, and 2.07% for “long-term” loans over nine years.


The IRS lists these rates on their website and they change frequently. In general, the IRS puts the burden on lenders, not borrowers, when it comes to personal loans. Before you fork over the cash, it pays to learn the rules. For more detail, head to the full post at the link below.

Yes, you should charge family members interest when you loan them money — here’s how much | Business Insider