Learn To Lend

We have two mortgages on our house, the first with the bank and the second with our grandparents.  When we needed money to buy our first home, the grandparents lent us about 20% of the total. It was a win/win, they were earning a higher interest rate on the money than they would have at the bank.  Not only we were paying less interest than we would have had in order to borrow the money from the bank, the interest we paid stayed in the family.

If Asheesh Advani has anything to say about it, this kind of inter-family lending will continue and flourish, aided by his company Virgin Money USA. Advani is President and CEO of Virgin Money, originally launched as Circle Lending in 2006, then acquired and rebranded as Virgin Money in March 2007. So far, so good. The company has processed more than $250 million in loans with a total default rate of 1.5 percent, only 0.5 percent on its mortgages.

Thanks to Advani, people in the same situation as our grandparents now have an easier way to lend money to their family, a need that will probably increase as wealthy baby boomers look to help share their financial success with family members.  According to Advani there are several reasons why someone might opt to use Virgin Money:

“The tax and legal benefits are compelling,” he said. “When you loan money to your kids through Virgin Money (say, to buy a house), your kids can deduct the interest that they pay you from their taxes just like you would do with a bank.”

In addition, it can make the loan seem more “official” with paperwork and payment plans which helps borrowers stay current on payments and reduces the stress of lending to family members.

Source: TheState.com: Anyone can be a banker with peer-to-peer lending