How To Give A Personal Loan To A Friend
Decide how important repayment of the loan is to you.
How to give a personal loan to a friend. Ideally a loan agreement should be dated and state the loan amount due date for paying it back in full the payment schedule and any agreed upon late payment fee see rule 5 or interest. And 14 percent of business owners last year reported tapping friends and family for loans to. Explain that you don t want money to ruin your friendship so you want to talk about how the repayment of the loan will be handled.
But the fact is a person who can t get a personal loan from a traditional source often has damaged credit or no credit both of which make this borrower a greater credit risk. Unfortunately memories fade and disagreements do arise. Chances are the person has poor credit.
Charge interest on the loan and set in place fees if your friend makes a late payment. Treat a personal loan issued by a loved one with the same respect and professionalism as you would a loan from a bank. There are also loans for bad credit but perhaps this person has yet to apply for one.
Protect yourself by creating and signing a document called a promissory note in order to detail and record the terms of the loan agreement. Before taking steps to give them the loan you should discuss the loan with the friend especially if it is a large sum. If you lend money to a friend or family member you might feel that his or her word or a handshake is enough to seal the deal.
Most of us are fairly generous people and we want to help a family member or friend when we can. Like marks s friend many people turn to friends and family over banks when looking for a way to finance a house buy a car or fund a business according to a 2011 report by the national association of realtors 7 percent of home buyers received a loan from a relative or friend to finance their home. If a family member or friend comes to you instead of a financial institution for a loan the odds are that the person does not have strong.
Having these in place will make the agreement formal and show you re serious about having the loan repaid. Talk with the borrower. You have a right to know what the loan will be used for and why they don t have the money.
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