In our twenty-five plus years of practice here at The Doyle Law Offices, P.A., we have gotten calls innumerable times regarding loans that have been made to family or friends. When the economy is struggling, these calls really start rolling in. While the details vary, the bottom line is the same. The client made a personal loan to a friend or relative and now they refuse to pay back the loan. The client cannot understand why or how this can be allowed to happen and they then make the urgent call to our law firm to solve this problem for them. While helping clients collect debts is part of the legal services The Doyle Law Offices is proud to offer, it is better to carefully consider the wisdom of making a personal loan in the first place, and if such a loan is to be made, the best way to go about it.
Why A Personal Loan May Not Be a Good Idea
When considering making a personal loan, ask your self how much of a hardship it will be if the loan is never paid back? This commonsense advice stands true from a legal standpoint as well. Collection cases can take a long time to work through. In most every situation, you as the lender will incur costs and fees out of pocket and up front. Even if a judgment in court is obtained, there are no guarantees that a money judgment can be collected. It does not matter how angry or betrayed the lender feels personally (this can be particularly true with family member loans) the law does not operate on feelings. The legal reality is that there are a number of ways debtors avoid their debts and frustrate even the most aggressive efforts to collect them.
Using A Loan Agreement from the Internet
Notwithstanding the above, people continue to make these personal loans. Potential borrowers will often offer very generous payback terms and people will be enticed by such promises. Frequently, people use loan agreements and promissory note forms and templates sourced from the internet. Lenders get a false sense of security because they have the loan terms in writing on some such form. Sadly, these do-it-yourself loan agreements are invariably flawed and sometimes unenforceable. When a loan goes bad and you find yourself sitting in a lawyer’s office listening to how your agreement is not worth the paper it's written on is the wrong time to learn this lesson.
Seek Advise from A Lawyer
At a minimum, if you decide to loan your old college roommate or your brother in law some money, seek the services of an experienced law firm to handle the details. A risk of this nature can be minimized with enforceable and professionally drafted paperwork. It is well worth the investment initially when considered against the hardships later on.
The Bottom Line on Personal Loans
The best advice when it comes to making personal loans remains the same – just don’t do it. However, if there are circumstances that have you considering lending money to someone, please call The Doyle Law Offices first. Let us counsel you on the all the pros and cons and if the loan still makes sense to you, we can help with the agreements and documentation to provide the best protections for you no matter what happens. We offer consultations by phone, Zoom or in one of our conveniently located offices in Wake Forest and Cary. Please call us today at (919) 228-4487 or fill out the form below.
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