My sister in the USA wishes to borrow 200,000 dollars from me. I live in Ireland. We intend drawing up a formal contract. Is anybody aware of tax or other implications for me? The term will be for around 5 years with monthly repayments.
You might want to factor into the contract something to ensure that you don't lose out due to exchange rate fluctuations and inflation. What rate are you charging her?
Thanks for that. Exchange rate is of course crucial given what has been going on.She said she would pay a higher rate than the best I am getting at the moment. This is 5.1%. So I guess 5.2% would be ok. This would be on a monthly basis of €1000-1500. After five years she hopes to be able to pay me the balance.
If you lend her €200K then you need to make sure that you get €200K back regardless of what this is in US$ over that period. That is my main point. The rate charged is a separate issue. You might want to make sure that it at least keeps pace with inflation and/or that it is comparable to market rates on offer on deposits.
Unless you are loaded, consider why your sister wants to borrow this from you, rather than from a bank. If she's a credit risk, well maybe you'll never see your money back. If you can afford this, fine. If not, think again.
Lending to friends and family is a risky business.
Good point. Price risk accordingly. In my personal opinion (and having been there, done that) lending to family or friends is probably not a great idea in many (most?) cases. There are too many problems that can arise. Refusing to lend may cause its own problems but these may well be minor in comparison.