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How to Handle Loans From Parents

How to Handle Parental Loans

There are many sources out there that will tell you to consider any loan to a family member as a gift. And while going into the situation with low expectations would serve a relationship well, what about the loaning person's finances? Many 20-somethings are turning to their parents for help in the midst of a tougher mortgage scene, and are counting on them to pull through with a familial loan.

Any situation where money passes through related bank accounts should be handled with care. Especially when it's a large sum — a down payment for a new home or a heavy medical expense — where it's obvious that you're asking for a loan and not a gift, which means you intend to pay your parents back in full. These transactions should come with some guidelines. To see what you should consider before entering into this type of arrangement just


  • Consider your parents finances and only ask them for help if you think they can afford it.
  • Be confident that you can repay the loan by coming up with a realistic payment plan.
  • Put all of the details in writing, including interest rate and payment schedule.
  • Sites like Nolo and LawDepot have promissory note templates that could serve as your IOU to your parents.
  • The Wall Street Journal suggests that you could formalize your loan through Virgin Money or ask an attorney to help draft a loan agreement.


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