I borrowed 500.00 from a friend, several years ago, and want to repay him. Although the subject hasn't come up, it has always bothered me. What kind of interest should I apply to this personal loan?
If you didn't expressly discuss terms I would recommend a gift in lieu of interest. Lending between friends can be complicated and change relationships unexpectedly.
Some people are offended by the idea of interest paid between friends. A gift acknowledges the benefit you've received, but doesn't monetize your friendship.
What kind of interest did the two of you agree upon when you borrowed the money?
If you didn't discuss this in advance, what kind of interest do the two of you now agree would be fair?
If your friend is now insisting that interest isn't needed, but you feel you owe something, you will have to decide for yourself what kind of gift would appropriately express your gratitude.
I think in your individual situation, as I have the same issues to look at soon myself, is, how did you leave the situation last when he handed you over the money?
For example; did you promise to repay the loan with interest included, or did you quite simply promise to just ear-mark it in your memory, for when he will ask you for a favor?
If he is expecting interest, I'd pay somewhere between 10 to 20% but remember, if he's a real friend and no interest was discussed, then I'd; a) Return the borrowed funds with a gift of his liking; wrapped and with a "Thank you" card (you can buy Thank you cards from any good card shop), plus, b) I'd make sure you remember it, for when he needs help and don't necessarily wait for his asking, either. When he's noticeably in a predicament of his own kind, offer him sincere help, but be sincere about it and not like; "I gotta do this guy a chore, cos' he helped me once before", cos' if he senses that kinda attitude from you, he might reply, "Look mate, if you don't want to really share your damn time with me, then just take a friggin' hike, somewhere else, Pal".
Something else to take note of, he might want to take challenge to this his own issues alone, for the betterment of his own self confidence, an issue we tackle with till the day we die, but there again, never assume that, cos' we all want help from time to time. Remember, it's his issue and he probably only wants loving hands on it, or a mind of enthusiasm on it, plus, when he lent the money, if he wasn't bothered about the interest and he's sincere, which if he didn't want anything back for it, then he probably is, I'd be humble and associate with him, on a level playing field in future because friendships come few and far between, of that particular breed, anyhow.
Same again, if he agreed to interest because, he might be a sincere and caring person, but just wants to make sure that you, (his friend), will respect his money, so you don't piss the relationship up the wall, because no relationship is ever perfect (in whole, nor in part), thus, appreciate the fact he's not slapping the full interest rates like any loan shark would, thus again, repay him with the interest (only as, previously agreed), with a small "Thank you" card. After all, it wasn't his obligation to lend you the money (he's a tradesman or whatever he does, not your personal bank manager and yet again, you asked him as a friend, so if he treated you more leniently than a customer, then that's an act of kindness in itself, after all, albeit, he might even be your dad.
If this discussion was over £10, I'd pay him back as previously agreed and invite him to a pint, at your local pub.