Working out interest

[medsecslave]

If I lent someone �20,000 in 2002, how much could I expect back now with interest added on? Thanks.

[WhiteBear]

well depends how much interest you are willing to charge!!

[factor-fiction]

Depends on which month in 2008 it was lent , what rate of interest you want to charge and whether any of the loan has been repaid.

You could do a search for bank base rates 2002-09 but I suggest 5% p.a. is a reasonable rate to use.

Assuming the loan has been in place for 6� years, an interest rate of 5% and no repayments have been made, the amount now due would be �27,463

[factor-fiction]

Typo in first line (meant 2002 not 2008). Should read:

Depends on which month in 2002 it was lent , what rate of interest you want to charge and whether any of the loan has been repaid.

You could do a search for bank base rates 2002-09 but I suggest 5% p.a. is a reasonable rate to use.

Assuming the loan has been in place for 6� years, an interest rate of 5% and no repayments have been made, the amount now due would be �27,463 .

[medsecslave]

The loan was to a relative in March 2002 and I would be repaid by her leaving her property to me after her death so haven't received any repayment at all. The situation now is that she needs to sell to go into a home - all a bit delicate really. Are you saying that I personally can demand a rate of interest or will her solicitor work it out based on bank rates? Thanks.

[factor-fiction]

I can't say whether it's appropriate to demand interest- I'm just giving an indication of what a reasonable amount might be.

Was there a written agreement?

Was a solicitor involved?

[medsecslave]

Yes, it was all above board with a solicitor involved as the money was for her to buy her council flat and I don't imagine she would object to me claiming interest since I won't benefit from the sale of the property as she had intended. I really just wondered what sort of figure I might be looking at.

[factor-fiction]

Have you considered offering to buy the property from her at a discounted rate?
Obviously any income will be taken into account in working out how much she should pay for care home fees but i assume she'll have to sell up anyway

[New Judge]

I have taken the Bank of England Base Rate history and applied it to your �20k, for the period 1st March 2002 to today:


01/03/02 07/02/03 4.00 �20,751.78
07/02/03 10/07/03 3.75 �21,077.98
10/07/03 06/11/03 3.50 �21,318.50
06/11/03 05/02/04 3.75 �21,517.82
05/02/04 06/05/04 4.00 �21,732.40
06/05/04 10/06/04 4.25 �21,820.97
10/06/04 05/08/04 4.50 �21,971.63
05/08/04 04/08/05 4.75 �23,012.42
04/08/05 07/09/06 4.50 �24,144.44
07/09/06 09/11/06 4.75 �24,342.39
09/11/06 11/01/07 5.00 �24,552.47
11/01/07 10/05/07 5.25 �24,972.72
10/05/07 05/07/07 5.50 �25,183.45
05/07/07 06/12/07 5.75 �25,794.41
06/12/07 07/02/08 5.50 �26,039.28
07/02/08 10/04/08 5.25 �26,275.24
10/04/08 08/10/08 5.00 �26,926.72
08/10/08 06/11/08 4.50 �27,022.99
06/11/08 04/12/08 3.00 �27,085.18
04/12/08 08/01/09 2.00 �27,137.12
08/01/09 05/02/09 1.50 �27,168.35
05/02/09 04/03/09 1.00 �27,188.45

It seems you would be due �7,188.45 (less tax, of course).

Interestingly, this is not unadjacent to factor30�s �back of the envelope� calculation using the 5% average. This is despite the Bank Rate being at 5% or more for less than two of the seven years.

The average rate of return over these years is 4.435%.

[medsecslave]

Unfortunately I can't consider buying it as I've recently separated as well as the fact it's the opposite end of the country from me and needs a substantial amount of work on it but thanks very much for those answers. I knew AB wouldn't let me down! Thanks.

[TCL-MUMPING]

If the agreement was that the loan would be repaid upon death, I would have thought you'd need to wait until that happens. When the agreement was drawn up there should have been an arrangement whereby you would be paid from the proceeds of any sale prior to her death if the property had to be selt for whatever reason. I am not sure that you can expect to be paid interest if that was not part of the agreement (although I assume the property is worth more than �20,000).