If you are still confused and have lack of knowledge about family loan then read further to understand the real answer to what is a family loan. A family loan is considered as a personal loan that is made for the family member.
In this matter, the level of relationship does not matter. What is more important is that if a person is taking family loan from a bank, he/she has to repay it and take up the beneficial one that gives them good rate of interest. If calculated, more than $60 billion US Dollars are loaned per year to family from family. Therefore, it is a common type of loan that is used by people all over the world. However, while taking such loans, people should be aware of the taxes and interests that each bank varies. For continuing healthy family relationships, many take this loan, but they should keep in mind the tax ramifications that must not affect healthy family relationships.
It may turn out as difficult to take a family loan, which is examined to crosscheck whether or not the loan receiver is capable of repayment. If the loaner finds that the person is not capable of repayment then the loan can be canceled. For this matter, one before applying for loan have to be alert and make sure that the proper repayment of loan is possible from his side.
Taking loans from banks are different where the money is insured and the receiver has to follow the norms set by the bank. Unlike bank, there is no other loan insurance that ensures the money to be returned to the lender if the relative fails or refuses to pay it back.
If you are taking loan from a family member, then you have to be certain that proper payment plan and payment amount has been set and discussed where the party is agreed to all circumstances. If in case, the person feels that he is not capable of meeting his obligations then he can ask for a gift in return. Other than this, any person in the family must not consider that the money is coming from a family member. It should be strictly followed as a norm just like taking money from bank. Some people fail to return the loan for which they could get sued if signed a contract.
Family loan should be kept extremely clear without a single misunderstanding and signing contracts will be a good part. One has to think twice and thrice before issuing or receiving family loans. A very good relationship can get soured if loan is unpaid or delayed. Many people find it a hectic part and feel real frustrated for repaying the full amount. However, these loans sometimes provide interest free funds, but remember that there could be hidden relationship costs.