“I am not a loan shark”: I lent $20,000 to my sister and she paid me back after two years with insane interest: 30%. What do I do?


Dear Quentin,

I loaned my sister $20,000 to help her buy a new house. We didn’t put any conditions in writing, but she said she would repay the loan in six months. (If it took longer to repay, and that was fine with me.)

Now she has repaid the loan. She included an insane amount of interest with the refund: 30%. I told him that I didn’t want interest, the amount of interest is ridiculously excessive, and I absolutely cannot accept it.

She says it’s not too much because it took her more than two years to repay the loan. I need help convincing her that this is too much. If I deposit her check into my account and write her a check to pay off the interest, I know my sister — she won’t deposit my check.

I tried to reason with her and pointed out that depositing the original loan amount of $20,000 on a CD would have made $600 not $6,000, but anyway I didn’t expect any interest .

She is very stubborn and insists that if I just look at her charts and graphs then I will be sure she is right.

Could you please support me here?

I am not a loan shark.

Please don’t tell me to accept his generosity. I can not. It would be like stealing from my sister and I won’t.

just a sister

Dear sister,

This is quite different from a last letter i received how to calculate the interest rate for a $6,000 loan over 12 years to buy a house. It took all sorts of financial gymnastics to arrive at a figure that was fair and yet not too generous. This letter, however, was written from the perspective of the person who received the loan rather than the lender. You are in a healthier position, albeit still somewhat uncomfortable.

In the absence of a bank transfer, I have a suggestion. Meet your sister for dinner, and before you order, tell her you need to get rid of something. Give him a card with a cashier’s check with the following quote from Polonius in Hamlet, Act 1, Scene 3. (Pardon me, I read it in high school.) and friend, And borrowing dulls the edge of farming.

If it means so much to your sister, say you’ll accept the dinner experience for a check. Tell her she’s paying for it. Deduct the price of the dinner from the $6,000 and use the cashier’s check to return the rest to him. Explain to him that it meant a lot to you to be able to help him, and that you received 30% in return would simply spoil the gesture for you. And given that dinner is a gift she gives you, it would be a bad way to ruin it by arguing.

I have heard of relationships between friends and relatives that deteriorate because of a bad debt, but never because of an astronomical interest rate granted by the borrower. But this illustrates once again the risk of mixing finance and friendship, even in the family. Your lack of a notarized loan agreement was a leap of faith, but it also shows that lack of clarity early in the process can lead to complications later. Keep us posted on how it goes.

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