How To Create A Faultless Loan Agreement Between Friends?
Friendship turns out to be questionable when it comes to lending and borrowing. You cannot accept mere words of your friend when you are about to lend cash to your friend or family member.
Most of the time what you said and did fly away in the wind and only the matter of money stands firm when there arises disputes regarding the borrowed cash. To avoid such unpleasantness, you can protect yourself by creating and signing a promissory note.
A promissory note is a record with the terms and conditions pertaining to the loan between you and your friend. Your friendship should not perish before you collect the loan amount. Moreover, you should make it apparent that you have lent cash to your friend and it was not a gift or complement provided to your friend.
Most of the time what you said and did fly away in the wind and only the matter of money stands firm when there arises disputes regarding the borrowed cash. To avoid such unpleasantness, you can protect yourself by creating and signing a promissory note.
A promissory note is a record with the terms and conditions pertaining to the loan between you and your friend. Your friendship should not perish before you collect the loan amount. Moreover, you should make it apparent that you have lent cash to your friend and it was not a gift or complement provided to your friend.
Be Alert:
Never lend cash to a friend even if you have the slightest doubt regarding a prompt repayment. If you wish to help such a friend in crisis, then choose to gift a small amount but do not commit by lending so as to avoid unpleasant issues in future.
Promissory Note:
A promissory note is a written statement that says the borrower promises to repay the loan as per the terms mentioned.
It also ensures the loan repayment with the interest if applicable. Before making a promissory note, decide how much money you are going to lend, the interest amount and the pay back schedule etc.
Preparing The Note:
When you prepare the note, always begin with your name as the lender and the name of your friend as the borrower. Do not forget to mention the loan amount and on the day when the agreement is made.
You can mention the interest on the loan and state the repayment of the loan in detail. If your friend would like to settle the loan completely after a financial profit happens, mention the event for the loan due. This will help you maintain your relationship without any disputes later.
Documentation:
Once you complete preparing the promissory note, your friend and you have to sign and date the document along with a third party as witness. If convenient get the document notarized by a notary public to secure the document.
Interest Rates:
If you feel that charging a friend interest for the loan an ungenerous and mean act, you may consider lending the money without interest. Most personal loans do not face problems with or without interest until some legal issues arise.
Anyhow, interest-free loans can be considered and a tax-free gift when the amount is lesser than tax exclusion amount. However, every decision you make regarding the loan should appear in the promissory note to keep away controversies in future.
Never lend cash to a friend even if you have the slightest doubt regarding a prompt repayment. If you wish to help such a friend in crisis, then choose to gift a small amount but do not commit by lending so as to avoid unpleasant issues in future.
Promissory Note:
A promissory note is a written statement that says the borrower promises to repay the loan as per the terms mentioned.
It also ensures the loan repayment with the interest if applicable. Before making a promissory note, decide how much money you are going to lend, the interest amount and the pay back schedule etc.
Preparing The Note:
When you prepare the note, always begin with your name as the lender and the name of your friend as the borrower. Do not forget to mention the loan amount and on the day when the agreement is made.
You can mention the interest on the loan and state the repayment of the loan in detail. If your friend would like to settle the loan completely after a financial profit happens, mention the event for the loan due. This will help you maintain your relationship without any disputes later.
Documentation:
Once you complete preparing the promissory note, your friend and you have to sign and date the document along with a third party as witness. If convenient get the document notarized by a notary public to secure the document.
Interest Rates:
If you feel that charging a friend interest for the loan an ungenerous and mean act, you may consider lending the money without interest. Most personal loans do not face problems with or without interest until some legal issues arise.
Anyhow, interest-free loans can be considered and a tax-free gift when the amount is lesser than tax exclusion amount. However, every decision you make regarding the loan should appear in the promissory note to keep away controversies in future.
