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Borrowing Money from Parents

K

KEV1N

Platinum Member
I have here a moral dilemma. I've graduated college and am shopping for a new (to me car). As discussed in other threads I've decided on a 2000-01 Infiniti I30. This can be had for $18k.

I have a good paying job as a programmer now and I do have job security. I was planning on financing this car on my own and I have the means to do so.

I was talking to my mom today and she was talking about how I didn't get a "huge graduation present" per se. As a reparation she is willing to let me borrow the entire $18k interest free. That is, she would pay for the car and hold the title until I pay her back in full, in variable amounts. Interest free.

There are two real issues here at hand. She has more than enough money to let me borrow this sum of money. The first issue would be building of credit. I have a 4 year credit history and a $14k student loan which I will start paying in 6 months (it will be a $105/mo payment). I have a FICO score in the mid 700s (I'm 23), so I feel I'm on the right track here regardless of me going through the credit union and financing the car at 4.75% (pre approved).

The other issue is being fully independent. I make enough money to live on my own right now (renting) and I can take on this payment. I just wanted to go through the whole process of financing my own car without my parents' intervention. However I would be saving a ton in interest if I borrow from them.

What would you do?
 
Finance part of it but I'm not sure of the exact amount that would affect your credit in a good way, say 5k or so? Take that with a grain of salt though.
 
I'd save the money in interest, personally. Is this something she'd ever hold over your head in the future?
 
Originally posted by: amdskip
Finance part of it but I'm not sure of the exact amount that would affect your credit in a good way, say 5k or so? Take that with a grain of salt though.
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That's funny you say that. I was running it through my head, financing part of it myself. $5k was the exact number I had in mind. I'm leaning towards this solution.
 
Originally posted by: Astaroth33
I'd save the money in interest, personally. Is this something she'd ever hold over your head in the future?
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My mom is a good and generous person. I know she is just looking out for me financially and she's extended this offer mainly because she doesn't want to see me hurting while making car payments.
 
Originally posted by: Astaroth33
I'd save the money in interest, personally. Is this something she'd ever hold over your head in the future?
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Yeah, as long as there won't be many or any strings attached, I would just borrow it from mom.
 
Originally posted by: BingBongWongFooey
Yeah, as long as there won't be many or any strings attached, I would just borrow it from mom.
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Same here. Save money where you can. Take her out for a nice dinner or something though.

 
I'm a strong believer in not borrowing money from family members. Whether they hold it over you or not, I couldn't help but be aware of the debt.

If I wasn't sure I could comfortably handle the financing, I would re-think the 18 grand car.
 
I would pass on her offer and finance it yourself.
1) I value my indepedence more than a couple thousnads bucks over a couple years.
2) Doing business with friends and family is a good way to lose friends and alienate family. I wouldn't want to tempt fate and risk ruining a relationship with my parents over money. I know you don't beleive it would come to that, and you're probably right, but why risk it?
 
Originally posted by: notfred
I would pass on her offer and finance it yourself.
1) I value my indepedence more than a couple thousnads bucks over a couple years.
2) Doing business with friends and family is a good way to lose friends and alienate family. I wouldn't want to tempt fate and risk ruining a relationship with my parents over money. I know you don't beleive it would come to that, and you're probably right, but why risk it?
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I agree, This is your Mom, not your loan officer. Do it on your own.

 
Good points here. I think there is a fine line between "doing business" with family and family "helping you out". I will rethink this, and I think the most I would ever accept is a split between financing and borrowing. It's a hard decision.
 
Or.. borrow the 18k, finance the car(or split it) and invest the rest. That might not be completely honest though. ^_^
 
HEY KEVIN! Remember me? That guy that stood next to you at Best Buy for that GeForce 3 Ti 200 video card on Black Friday? Wassup? Anyways, I think you should do it yourself. But, if you want to save interest, go with mom. I do agree with the other guys on dealing with family members. It can be a pain. But, it will be up to you. But understand that when you finally paid off this car, it will mean a lot to you individually.

On a side topic, why do you want a sedan? You have a family for those 4 doors? hahhaha...You should get a Lexus....we all know that Lexus IS the #1 luxury car automaker in the United States..beating out BMW, Mercedes-Benz, Acura, etc....
 
What I'd do kevin, would be to borrow that money. She has no problem with it and you don't need a credit score bump (it's solid now and will get even better). Living on your own and being in control of things is nice, but your parents are still your parents and there is no shame in borrowing that money from her IMO. You know you can do fine without her, so it's not an issue of having to prove anything to yourself. I'd just take the loan from her.

BTW if my parents extended such an offer to me I'd take it. They are not the type to hold it over my head as leverage and we have a respectful enough relationship that they know I'm not going to try and screw them out of the money (pay back $50/year for instance), and I on the other hand know that they won't bitch about it constantly. I'd have no qualms borrowing the money from my parents, so really only kevin knows how it's likely to pan out if he does it through his mother or not.

The middle ground - financing $5k yourself and getting $13k from her - is probably the best. It will help your credit a bit more, and interest on $5k is negligible. I'd recommend taking out a short term on that $5k - 36 months at most. Then you get it paid off and build credit quickly and pay the bulk of the $13k off after that.
 
If you can't comfortably afford to borrow the 18K from a bank, then reconsider the 18K car. I love how people get their first job and buy a new car (or relatively new) car in the first year or two. Do you realize what that same 18K would do if you were investing over the next 3-6 years? Or, if you bought a 6-8K car and used the rest to invest or dump into a saving account how much better off you might be? Just in payments alone I bet you'd be saving a hundred or more a month. That's good to save while you have a steady job. You can get a new car in 5-10 years when you have your retirement plan in good shape, a good savings account just in case, and checking account that covers your monthly expenses and budget.

Just throwing out other ideas here. Not saying you're an idiot by any means. Figured you might not have thought of it this way.

 
Originally posted by: notfred
I would pass on her offer and finance it yourself.
1) I value my indepedence more than a couple thousnads bucks over a couple years.
2) Doing business with friends and family is a good way to lose friends and alienate family. I wouldn't want to tempt fate and risk ruining a relationship with my parents over money. I know you don't beleive it would come to that, and you're probably right, but why risk it?
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^ what he said, things happen, you dont want to be in a situation like that.....
 
Too many not-real families in this world.

I have borrowed short term from my parents....they have tons of cash, I'd never take from them if it were to cause a strain. I pay back what I owe (it's usually been while in school, you need money this month and pay back next month).

Now they also 'borrow' from me in the form of help around their house or with their cars/boat. I am a rather handy guy (like my dad) so the extra set of hands he needs also I am excellent with detailing (part of this he created by buying me and teaching me to restore it (1966 Mustang GT))....so I will go over there every so offen and knock out his vehicles and I do the boat time to time with the longest time being when he first got it .... I spent 34 hours on it, burning up two buffers also 🙂.

That's what families should do.

Now I would take that interest free loan probably in higher interest times.....how long do you plan on financing the car? If you are going to end up paying more than a 1/4-1/3 of it's value in interest I'd go with mom and use something else to build credit if you have too.
 
you can always borrow $10k from your mother and then finance the rest to build up your credit? With 8K loan, you can just pay 2x the required monthly payment
 
Originally posted by: alkemyst
Too many not-real families in this world.

I have borrowed short term from my parents....they have tons of cash, I'd never take from them if it were to cause a strain. I pay back what I owe (it's usually been while in school, you need money this month and pay back next month).

Now they also 'borrow' from me in the form of help around their house or with their cars/boat. I am a rather handy guy (like my dad) so the extra set of hands he needs also I am excellent with detailing (part of this he created by buying me and teaching me to restore it (1966 Mustang GT))....so I will go over there every so offen and knock out his vehicles and I do the boat time to time with the longest time being when he first got it .... I spent 34 hours on it, burning up two buffers also 🙂.

That's what families should do.

Now I would take that interest free loan probably in higher interest times.....how long do you plan on financing the car? If you are going to end up paying more than a 1/4-1/3 of it's value in interest I'd go with mom and use something else to build credit if you have too.
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yeah really - not every family is a jerry springer sort of situation 😉

 
Your credit score is great, so it would be fine to take the loan from her.

Another option would be to take the loan from your mom, but also get the car financed. Put some of your own money down, and pay off the card in just a few months. Pay your mom back as agreed, and still get a little bump in the credit score.
 
Take the 18k, put 5k in the bank, pay 13k on the car... finance 5k.

The intrest you earn from the bank on your 5k won't be as much as the intrest you are paying from the loan's 5k, but it'll make all the less you have to pay.

You can go every month and make a withdrawl from one bank and a payment at another (or even set it up to automatically pay) and not have to worry about how much money is in there until the last couple of months. If you do it automatically, not only do you not have to worry about it, you would raise your credit score for being on time, every time, while sitting in the comfort of your own home.
 
It's not unusual for kids to buy a house / co-op on a loan from the parents. I have a friend who is doing this, and I may do it myself one day. So why not for a car? Go for it man, and if you want to build up the credit, do that partial financing thing.
 
dont hesitate to do it. I borrowed 6K from my mom to pay off some high interest credit cards. I pay $175/month and that's it. No hanging it over my head or anything.
 
Originally posted by: bigalt
I'm a strong believer in not borrowing money from family members. Whether they hold it over you or not, I couldn't help but be aware of the debt.

If I wasn't sure I could comfortably handle the financing, I would re-think the 18 grand car.
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What happpens if you lose your job and can't pay your mom. I know it's something that you think won't happen but what would you do if it did? I agree in not borrowing money from family, no matter how good the intentions. I say finance the car.

If you are really hellbent on saving some money on interest, finance the car and then take the $18k from your mom and pay if off immediately.
 
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