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How to lend money to a friend legally
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Question How to lend money to a friend legally - July 15, 2015, 09:49 AM

Just wanted to get some inputs from anyone on here who has done something similar.

Basically I would like to lend a friend 5K to be paid back in full plus a extra 500... would a promissory note be good enough ? How does this work when it comes to taxes ?

Would love to get some advise from other who have done this before ..


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July 15, 2015, 10:15 AM

Don't lend money to friends! Your friendship will end.


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July 15, 2015, 10:21 AM

Perhaps a peer to peer lending site may facilitate such things? That said, I'd encourage your friend to talk to a bank or get a credit card (I know that is not always an option though).

I was always told not to loan money to family that you expected to get back. I know you said this is a friend, but any friend close enough to loan money to might as well be family in my books.

Bottom line is that it will be a hassle to get the money back through the court system if your friend decides to screw you. May never be a problem, but you have to weigh the risk vs. reward.


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July 15, 2015, 10:33 AM

If you lend money to a friend and they don't pay you back, it was probably worth it. Personally, if they can't get 5gs from a bank, they shouldn't get it from you.


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July 15, 2015, 11:08 AM

Don't do it unless you will be ok with not getting your money back. I only lend what I'm ok loosing when it comes to friends and family.

Otherwise you can draft a legal document but will still have to serve him, take him to court etc. if he/she doesn't come through and still may not get your money back.


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July 15, 2015, 11:22 AM

Yep...I give no one money. Period. I value my friends enough to know that I will do something to them if they flaked on me, so I just rather not even be in that position.

As well...I dont give it to family. Only people can get my money is my parents because I would not have the funds I do if not for them forking theirs over first.


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July 15, 2015, 11:22 AM

- What is the term of the loan? 1 month, 1 year, 30 year?
- How is it payable; lump sum after the full term, monthly installments?

Basically if this is less than a year loan, you are charging him 10% and most lending institutions would give him a better rate than that...

* If his credit is so bad that he can't get a real loan, you might question if he can/will ever pay you back.

Whats the loan for? ... it better not be for a Gixxer! haha


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July 15, 2015, 12:07 PM

Quote:
Originally Posted by bds120 View Post
I value my friends enough to know that I will do something to them if they flaked on me
sooo..not much apparently?

You mah bro and all, but if I don't get that $20 by tomorrow, imma hafta kill ya...


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July 15, 2015, 12:43 PM

Quote:
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sooo..not much apparently?

You mah bro and all, but if I don't get that $20 by tomorrow, imma hafta kill ya...
Glad you understand. This is exactly right.

Its simple...If I give you money its off pure trust. The problem is the person excepting money may think completely different and be with that "you my boy BLUUUEE" attitude and think its all gravy.

Its different from lending a 20 in a bar or whatever but we start talking hundreds and the level increases significantly.


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July 15, 2015, 01:09 PM

1. You are not a bank. So charging interest is a no-no. Not sure how it's viewed by the law.
2. If it's a true friend, you wouldn't be having this issue. I have friends I could hand my wallet to and come back years later to get it without a single worry. Very few of them, but they are there.
3. Don't do it. If you have this many questions about it, you will run into trouble.


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July 15, 2015, 01:36 PM

Hi guys .... thank you all for taking the time to respond ... I really appreciate all of your inputs .... Like many of you I usually don't like lending my money out and usually stick to this rule ... but some time I don't .... with this specific friend ... i have given him money to barrow on a couple of different occasions as a favor with no interest and he did pay me back as promised but a bit late on both of the occasions and i did tell him the last time it will be the last time as i don't usually don't like to lend my money out to friends and family and nothing personal against him or anything ... but this time he has come to me again and offered me 10 percent which is pretty good considering the risk and reward ..... he has 6 kids and needs to the money to pay some bills that are late and and because he will be doing some kind of contract work for a month where he will not be paid until the end of august when its complete so that the reason he can use this money to pay of car loans and family bill until he finishes that contracted work ..... as a person i know he has strong values and would not intentionally fuck me offer but as with anything there is a risk and i just want to take my legal step for that just in case moment and that fine with him ..... he understands this and is totally fine with it ....

the load will be for only 45 days and if its late he has accepted a late payment fee of 20 for each day the full amount is not paid in full .....

again thanks for all the advise guys


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July 15, 2015, 01:44 PM

A promissory note is fine.

Make the agreed amount for $4,999 so should he default, it can be kept in small claims court and quickly converted to a judgment.

Keep this in your back pocket on how to convert the judgement to a collections order.
http://www.courts.state.md.us/distri.../dccv060br.pdf



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July 15, 2015, 01:44 PM

Quote:
Originally Posted by MudDawg View Post
1. You are not a bank. So charging interest is a no-no. Not sure how it's viewed by the law.
2. If it's a true friend, you wouldn't be having this issue. I have friends I could hand my wallet to and come back years later to get it without a single worry. Very few of them, but they are there.
3. Don't do it. If you have this many questions about it, you will run into trouble.
You have friends?


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July 15, 2015, 01:49 PM

Can I have $5k?


Do you know what the money is going to be used for?
Have you validated that his income to debt ratio is capable of allowing him to pay you back in time or at all?
Does he have no other friends to loan him the money or SPLIT the loaned amount with?

Does he own anything of greater value that you have hold as lien against the loan?


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Last edited by Dark; July 15, 2015 at 01:52 PM..
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July 15, 2015, 02:02 PM

Quote:
Originally Posted by dodge131 View Post
You have friends?

WOW!

Harsh!!!!


But fair.


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