CAR – my family sounds a lot like yours. We’ve had loans between family members on both my side and husbands side. But they documented with signatures, and were not in any way considered gifts by any of the parties.
Interest rates were typically even or near even with market rates.
One family member, on my side, defaulted. Then he got upset with the parent involved would not issue a new loan. He didn’t get much sympathy from other family members when the parent presented a copy of the signed loan agreement of the previous loan – including payment records showing when it defaulted. He got over it because he knew he was in the wrong.
As long as ALL parties know it is not a gift. Have scheduled payments, an amortization schedule, etc… It can work very well. The problems arise when one party thinks it’s a gift, because the terms aren’t well defined.
