Rate of return on loan

[LivingAlmostLarge]

I owe my mom a loan from a long time ago 2002 for $5000. What would you consider a reasonable rate of return since then? It was a loan to help us during a tight time in our life when we first bought our house but didn't tell them then. I realize it's been a ridiculous amount of time and have no idea why I didn't pay her back sooner.

So what would most of you consider reasonable?

[sblatner]

The long term AFR (Applicable Federal Rate) interest rate for May 2002 is 5.85%.

https://www.irs.gov/pub/irs-drop/rr-02-25.pdf

If you do 5.85% on $5k from 5/1/02 to 1/3/18, the interest is $4,588.64.

If you want to give me a more specific date, I can give you the info. Not sure how much you want to pay her.

[cooliemae]

The CPI calculator on the Bureau of Labor Statistics says that the $5k is worth about $7k today. At a minimum that would be where I would start, so that she at least has the same purchasing power that she had in 2002.

The rest is gravy.

[disneysteve]

There are a lot of ways to answer this but I think the inflation-adjusted figure is a great place to start. At least make it so that she didn't lose money in the process.

I suspect she didn't make the loan expecting a great return. She did it to help you. And she probably didn't care if the money came back or not. I imagine she would be quite satisfied to get back $7,000.

[snafu]

If the situation were reversed what sum would you expect to be paid back?

[amarowsky]

I think I would agree w/ the $7k. Especially if your mother's motive was to help you then, and she did so willingly without much negotiation.

For a general personal loan, I think observing the current prime rate would be a good un-biased control. I think it's right around ~4%. Merely my opinion, that way their time value wasn't wasted, and it comfortably above the savings rate (Plus no 1099 needed for your Mommy).

[LivingAlmostLarge]

July 2002 till now. It's a long complicated situation. I'd like to just give her a car but I can't because of my in-laws. I have to sell the car at a matching rate i can get and then pay her back. I'd call it a wash but my MIL would hassle me to no end.

So now I have to calculate what I should pay her back. So CPI says $7k. But assuming I give her a return it would be $4500? So $9500?

[creditcardfree]

Why is your mother in law involved in a transaction with your mother? Why does she need to know the details. Give your mom the car, and tell your MIL that it is none of her business. Or tell her your MIL that your mother paid you for it.

[GrimJack]

I like the $7k amount but if you want to pay interest you can use the rule of 72: choose a reasonable rate of return (like 3%) divide it into 72 = 24 so the $5k would double in 24 years (suddenly, my advice falls short so, uh - never mind).

[tripods68]

It's your mom after all. Here mom $5K + 1K =$6K for not paying you sooner. Call it the day!

Just my 2 cents.