Loans From Relatives Can Get Awkward. There’s an App for That.
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What is the main topic discussed in this episode?
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Here's your Money Briefing for Tuesday, May 21st. I'm J.R. Whalen for The Wall Street Journal. Ever try asking a family member for a loan? It can get pretty awkward.
How do apps and websites reduce awkwardness when asking family for a loan?
Apps and websites can eliminate some of those uncomfortable moments and streamline the process.
They have features like reminders for upcoming payments. So you'll get an email saying, hey, you have a payment that's due in five days. They will track your loan balances and some will even facilitate digital transfers for you.
We'll talk to Wall Street Journal reporter Dalvin Brown after the break.
Access to affordable credit helps me pay my employees, but I don't really need it.
Why do people feel vulnerable or embarrassed about borrowing from relatives?
The inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See?
Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need.
While increasing megastore profits. They deserve it, don't they?
When is borrowing from family preferable to a bank loan?
Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Online tools can help reduce the risks that come with loaning money to relatives. Wall Street Journal reporter Dalvin Brown joins me. Dalvin, why is it so uncomfortable for some people to ask relatives or friends to loan the money?
It can create a sense of vulnerability and dependency, potentially straining personal relationships. People often worry about the social implications.
What IRS rules apply to loans from relatives and when is interest required?
They don't want to appear financially irresponsible or cause tension if they can't repay the loan promptly.
I guess if you say Uncle Joe, buddy, old pal, they kind of know what's coming.
Yeah, exactly. Or Uncle Joe doesn't want to call you to ask you to repay the loan if you have it. Uncle Joe doesn't want to have to play debt collector at the family picnic.
Which apps and tools (like Zerdu, Pidgin, Nama) can streamline family loans and how do they work?
It causes problems for both people who are in a situation where they need money, but lenders also have a lot to be concerned about as well. know you have all this potential mess with the family if you go this way why not just apply for a loan from a bank bank loans often come with stricter eligibility requirements they charge higher interest rates and have longer processing times for people asking a relative or a friend for a loan can be quicker more flexible and especially if they have a less than ideal credit score Also, personal loans from family or friends might come with a lower interest rate, making them a more attractive option if you're financially responsible.
What does the IRS say about loans from relatives? What kind of rules govern that?
The IRS has specific rules regarding loans from relatives. If a loan is for $10,000 or more, the lender should charge a minimum interest rate somewhere around 5% to avoid it being considered a gift. And this also ensures that the loan is treated as a legitimate transaction, which may come up when you're filing your taxes.
How does the IRS know if interest was charged?
This normally would come up during an audit. The IRS can determine if interest was charged by examining both the loan agreement and any associated financial records.
How much do these loan-management apps cost and what fees should users compare?
And again, both the lender and the borrower should document the terms of the loan, including the interest rate, and keep detailed records of any payments that are being made and received.
In your reporting, you highlighted a couple of online tools that can facilitate loans like these. How can they make this process smoother and maybe less expensive?
So I was able to find a couple of apps and websites that can really smoothen this process out. So online tools like Zerdu, Pidgin, and Nama streamlined the loan process by providing clear, standardized agreements and automating payment schedules. They have features like reminders for upcoming payments. So you'll get an email saying, hey, you have a payment that's due in five days. They will track your loan balances, and some will even facilitate digital transfers for you.
Do these platforms check credit or protect lenders — what personal data and trust are involved?
Others, you'll have to Venmo your uncle outside of the app, but then go back and report it to the app.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:01–0:42
2
How do apps and websites reduce awkwardness when asking family for a loan?
0:42–1:25
3
Why do people feel vulnerable or embarrassed about borrowing from relatives?
1:25–1:45
4
When is borrowing from family preferable to a bank loan?
1:45–2:21
5
What IRS rules apply to loans from relatives and when is interest required?
2:21–2:44
6
Which apps and tools (like Zerdu, Pidgin, Nama) can streamline family loans and how do they work?
2:44–4:02
7
How much do these loan-management apps cost and what fees should users compare?
4:02–4:51
8
Do these platforms check credit or protect lenders — what personal data and trust are involved?
4:51–9:15
Speakers
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