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6.1 Introduction to Lending

6.1 Introduction to Lending
  • Math Help

    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."

  • Consumer Suggestion

    Do you have questions about obtaining or paying back your student loans? Visit Federal Student Aid or American Education Services for assistance.

  • Checkpoint Solution

    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.

  • Comments (3)

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    system user
    Guest   1 decade ago |
    @Cody: I had this problem when I bought my first car. I received a higher interest rate because I didn't have an established credit history.
    system user
    Cody (moderator)1 decade ago |
    If you're worried about not qualifying for a loan because you don't have a credit history you might want to do what I did.
    I opened a credit card which I use only to make small purchases. As soon as I make the purchase I pay off my credit card. This way I won't owe any interest, and I can build my credit score so that I can take out a loan if I decide to buy a house.
    system user
    Ron Larson (author)1 decade ago |
    This is the last chapter of "Math & YOU" that deals primarily with money.
    Chapter 2: Consumption
    Chapter 4: Inflation & Depreciation
    Chapter 5: Taxation
    Chapter 6: Borrowing & Saving
    The remaining chapters cover other applications.