Loan Repayment Agreement

If you offer to lend OR borrow money from a friend or family member treat it like a business transaction. Put it in writing with a simple Loan Repayment Agreement.

You both need to know was is expected.

Agree on:

• the total amount to be re-paid;
• how frequently the instalments will be paid;
• how the instalments will be paid; and
• when the final amount is due.

Having a payment system lays down the expectations for both parties.

Benefits if the Loan Repayment Agreement for the lender:

• You are doing a nice thing helping someone else out;
• You have a written commitment of how and when your money will be returned; and
• If anything was to happen to you, the amount owing can be recouped on your behalf.

Benefits of the Loan Repayment Agreement for the borrower:

• Money upfront to solve your cash flow problem;
• No interest fees from the bank;
• A structured timeframe to repay the loan to help you budget.

I lent a good friend $2,000 to help him with a bill to repair his car. Initially he paid me $100 per week, sometimes $50 per week, then I would get random amounts in my account weeks apart.

I would see him out at a bar buying rounds of drinks for everyone and I would be furious that he was out having a great time while I was having to go without. I tried to bring it up a couple of times and he said I needed to chill. 

I didn’t need to chill – I needed my money for my bills!

He once gave me an envelope with 50 x $1.00 scratchy cards saying if I won anything that would go towards the debt he owed me! I never got the full amount back.

We don’t talk anymore.

Angela

Save your relationships by being clear when it comes to money. If the person asking for your money won’t commit to the agreement – let them know that sometimes money and friendships don’t mix. If you are their last resort – that means they have approached other people before you and they have said no.

Be wary that you may never get your money back regardless of the borrower’s best intentions.

In Bank of America’s survey, people admitted that they had gone the distance to avoid a friend they owed money, from ignoring their texts or calls and pretending not to see them, to outright blocking the other person on social media.

Disclaimer: this is not a legal document

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