How much to charge for a loan?

November 10, 2010 6:34 PM

I'm loaning someone $16,000 for one week. What's a reasonable fee to charge the person for the loan? $500?
posted by shoe478 to Work & Money (5 answers total)

You can get some idea of these sorts arrangements work in the commercial realm here. However, keep in mind payday loaners are usually considered toeing the line of usury.
posted by griphus at 6:42 PM on November 10, 2010

I'm no expert on what's "reasonable". But, by simple interest method, that works out to an APR of 162.50%, well above any state or national usury limits.
posted by randomstriker at 6:42 PM on November 10, 2010

What is the risk that you won't get your money back? What is the hassle like for you? Do you want to do this person a favour? The actual interest you might otherwise earn with the money is negligible, so you need to provide more information so that we can give you an answer.
posted by ssg at 6:43 PM on November 10, 2010

The reasonable fee entirely depends on your relationship between you and the person you are loaning the money. If I was loaning that much money to a friend for only one week I'd either do it for nothing or consider a sum equivalent to the amount of money I'd lose from having it sat in the bank earning interest.

If it isn't a friend, then payday loan rates are more what you need to be looking at.
posted by Brockles at 6:44 PM on November 10, 2010

Is this a loan for a friend? Please please promise us you will have the terms of this loan WRITTEN DOWN AND SIGNED AND OFFICIALLY NOTARIZED (and maybe you will also hold something valuable as collateral), before any money changes hands, just in case. We would hate to have you come back here in a month with a very different kind of AskMeFi question...
posted by Asparagirl at 6:46 PM on November 10, 2010 [1 favorite]