It is common for people to sometimes lend money to someone, be it a friend or a relative. Sadly, it is also common for the borrower to not pay the lender back.
If you are going to lend money to someone, friend or relative, you should have a written agreement as to the amount loaned, the rate of interest, if any, that the borrower will pay expressed in a yearly rate - not a monthly rate -, and the arrangements as to how and when the money will be paid back. This can be done in the form of a promissory note or as simply as just jotting something down on a piece of paper, although a promissory note is much better (see my earlier article on ‘non-payment of a promissory note’). What is important is that the names of the lender and borrower, the amount borrowed, the interest rate, and the repayment schedule are recorded and the borrower signs and dates the promissory note or the piece of paper and that you each have a copy of the document. In other words, the debt itself and the repayment plan are documented in writing for future use if needed. The lender should keep the original. A formal promissory note is the best document to obtain but anything in writing and signed and dated will be better than having just a verbal arrangement. This being said, even a verbal arrangement may be enforceable depending on the circumstances, but in the event that the borrower disagrees that it was a loan, it will be harder to prove than if you have a written document.
If you are not being paid back for a loan that you advanced or the borrower was making payments and then stopped paying for some known or unknown reason, you should call me to discuss what can be done to recover your money.
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