Not all loans involve a lending institution. People sometimes borrow money from relatives or friends when
- the purpose of the borrowed money is too risky for lending institutions.
- the borrower has a poor or nonexistent credit history.
Whether you are considering lending to or borrowing from relatives or friends, here are some suggestions.
- Make out a promissory note. If there is a default on the loan, the lender will need the note to take an income tax loss.
- Create a repayment schedule.
Following these suggestions will help keep the transaction more businesslike; it can be easy for the borrower to regard the loan as a "gift."
A negotiable contract requires a payment of money, describes or specifies who gets paid, and is capable of change through negotiation. The key feature is the third one, which means that status as payer or payee of the note is legally transferrable from one person to another. The crucial phrase on the note itself is "to the order of." A document without these words is not negotiable.
These comments are not screened before publication. Constructive debate about the information on this page is welcome, but personal attacks are not. Please do not post comments that are commercial in nature or that violate copyright. Comments that we regard as obscene, defamatory, or intended to incite violence will be removed. If you find a comment offensive, you may flag it.