Lending money to a friend always involves risk and should be avoided if possible. Unfortunately, however, it may happen that a friend asks you for a loan, and in that case you will be forced to decide whether to grant it or not. Before you give him any money, carefully evaluate the situation. If you decide to accept, it is important to document the transaction to legalize it and protect yourself. Afterwards, don't be afraid to remind him that he owes you money if he forgets it. In the worst case, you will have to sue him to get back your money.
Steps
Part 1 of 4: Deciding whether to Take a Loan or Not
Step 1. Decide if you are willing to lend money
You don't have to - by the way, many friendships end precisely because of the disagreements that a loan can entail. Consequently, you should think carefully about whether to accept, especially if it is a large sum.
- Avoid making loans to friends who are notorious for not managing their finances responsibly. As important as this friendship is, that doesn't mean you can make a loan lightly.
- If a friend of yours needs five euros for lunch, don't hesitate. You yourself can find yourself in this situation. Lending a few dollars to a friend is not the end of the world, as long as this person is important to you.
- If he needs 300 euros to pay the rent of the house he lives in with his family because he lost his job, he is probably asking you in a moment of desperation and will do what he can to pay you back. On the other hand, if he asks you 1000 euros for a pleasure trip with his new girlfriend, you have to reconsider your friend's character and your friendship.
Step 2. Find out to what extent it is important to you to recover this money
When you lend money to a friend (or anyone, actually), you always run the risk of never seeing a penny again, for one reason or another. Therefore, before making such a decision, think about the repercussions you will face if the loan is not repaid.
- If your closest and most trusted friend asks you for 30 euros, it shouldn't be too much of a problem if they don't pay you back. On the other hand, lending the same friend $ 10,000 can damage the relationship (and your financial situation).
- Remember that you should never lend more than you can afford to lose. If your friend does not repay the loan in a timely manner and for this reason you are unable to meet your financial obligations, then you absolutely cannot afford to lend money.
Step 3. Imagine the loan is a gift
Is this friend very important to you? Then you can simply think that the loan is a gift. If you have a bad feeling that you won't get a penny back, but you still want to lend him some money, convince yourself that it's a donation. This way you will not hold a grudge in case of non-return.
You can, however, tell him that it is a loan and that he should pay you back the money as soon as he can. However, you actually need to understand that you may never see them again. In most cases, it's not the wisest choice to make. But if he is a very close friend and money doesn't matter that much to you, consider the loan as a gift
Step 4. Discuss the loan with your friend
Before proceeding, you should discuss this with him, especially if it is a large sum. You have a right to know how he will use the money and why he is short of money. Explain that you don't want to ruin your friendship because of the loan, so you want to agree on how the repayment will be handled.
- When you talk to him, it is important to be honest. Tell him that you want to help him, but that you also need to think about yourself. Emphasize that it is very important to communicate openly and that he should talk to you if he has difficulty getting your money back, without avoiding you.
- If being so direct about this makes you uncomfortable, tell him that your wife, lawyer, or accountant wants it to be clear in order to protect your financial interests.
- Ask him why he didn't go to a bank or other institution that lends money. If it is a large sum, you have every right to ask such a question to ponder your decision. It may or may not have a valid reason, but either way it is important information and you need to be aware of it.
Step 5. Don't be afraid to refuse
In some cases you will not be able to afford to make loans, or you will not want to. Whatever the reason, deny yourself if you feel it necessary. If you don't want to lend this friend of yours money because you think he won't pay it back, but you want to keep the relationship intact, it's best to make up an excuse as to why you can't fulfill his request.
- For example, you might say, "I have a rule: I don't lend money to friends. It's not that I don't want to help you, but I've lost too many friends over money and I don't want to lose you too."
- If he gets into trouble and you don't know how to respond, you can tell him you need to go home and take a look at your budget. Then, send him an e-mail explaining: "I'm sorry, I would like to help you, but I really don't have the financial possibility. Let me know if I can do anything else for you."
Part 2 of 4: Legalize the Settlement
Step 1. Sign a contract, especially if it is a large sum of money (what is meant by "large" is obviously relative)
It is essential to draw up a contract that defines the terms of the loan. This document will include the following information: identity of the person lending the money and of the beneficiary, amount of the loan, date on which the loan must begin to be repaid and date on which the last payment is due. It should also indicate any interest rate.
- Remember that this document is primarily intended to protect you should your friend be unwilling to return your money. In any case, it also has the aim of explicitly clarifying the terms of the loan, in order to avoid misunderstandings.
- Both parties involved should sign the contract on every page and at the bottom, otherwise it won't be legal. The contract must also indicate the date on which it was concluded.
Step 2. Make sure the document is legally enforceable
To be, it must include the following information:
- The agreement must be put in writing and signed by the borrower. You, or the person who disburses the loan, must also sign it.
- The borrower must undertake the obligation to repay the amount of money disbursed.
- The document must indicate a specific amount of money (with or without interest).
- He must specify the expiration date of the loan, therefore by when the sum must be repaid.
- Finally, it must indicate the methods of payment and the consequences to be applied in the event of delay or default.
- The document should only cover the loan in question, without further agreements.
Step 3. Determine how to return
In the document you should define the date on which you plan to start receiving the money you are owed and the date of repayment of the loan. Be sure to indicate any interest to be added to the amount paid and the penalties in case of delay.
- For example, if your friend receives $ 500 on February 1st, you can determine that he or she will have to start repaying the loan starting April 1st. You will have to pay 100 euros per month with an interest rate of 0.5% (if you pay on time or in advance) or 5% (for payments received late). It clearly states that the last payment must be made by August 1st of the same year.
- You don't have to decide on the payment methods yourself. You can work it out with your friend, but be sure to put all the details in writing.
- Charging an interest rate is not mandatory.
Step 4. Get the document authenticated
Do not neglect this step, in fact it is important for a third party to verify the signature of the document and the identities of those involved. Since the contract will be authenticated by a notary, your friend cannot later accuse you of forging his signature. For this purpose, you must both go to the chosen notary's office with all the required documentation.
- Remember that notaries do not offer legal advice. Furthermore, while authenticating the document, this does not guarantee that the other party truly understands the contract and respects it.
- All of this may seem like a nuisance to you, but it's to protect you. If your friend accuses you of not trusting him or complains about all this paperwork, then you should take a step back. A good friend is perfectly capable of understanding that you are doing this for the sole purpose of protecting yourself.
- Keep the original document and give a copy to your friend so that both of you can refer to the contract when you need it.
Part 3 of 4: Request a Loan Return
Step 1. Remember that you have the right to have the money you lent back
If your friend does not return it to you in compliance with the contract, then you need to take measures. But before you sue him, you should try talking to him. It is possible that there is a valid reason behind the non-payment, or you have simply forgotten about it. Many feel guilty when they have to talk about such a sensitive subject, but in this case you should definitely have no qualms.
Remember that the money is yours and that you have worked hard for it, so you have the right to ask for it to be returned to you. If your friend hasn't bothered asking you, then you shouldn't be bothered to request a refund either
Step 2. Call or email him to find out what happened
The first time you contact him to ask him why you haven't received any payment, try to be informal. Make it clear that you are not accusing him of anything, but that you are worried about him and that you want to help him as much as possible.
- For example, you can say: "I'm calling / sending you this e-mail to find out how you are. I saw on my calendar that you should have sent me a payment yesterday, but I have not received anything on the account. Is everything OK?".
- If you attack him, he will immediately get on the defensive. Don't call him and say, "You owe me money, you didn't pay me on time. I want to know what happened." You will look angry, as if you are assuming that he will never pay you back.
Step 3. In the beginning, try to be understanding
If you have known this person for a long time and trust them completely, you can be tolerant (if that seems appropriate to you). For example, if when you contact her she explains that she hasn't forgotten about you, but her son broke his arm, has had other things to think about and will make the payment within a few days, give her the benefit of the doubt.
Giving the benefit of the doubt means deciding to trust this friend and protect the relationship. However, if you don't trust this person very much, or don't seem sorry or worried despite being late, then you have no reason to be understanding
Step 4. Remind your friend what will happen in the event of a default
If he doesn't pay you, explain the consequences. This does not mean that you have to threaten him with violence, but you must reiterate that you will not give up what is due to you. For example, remind him that if he doesn't pay back the loan, you will never be able to give him money again in the future.
- You can also tell him that his neglect has deeply affected your trust in him and that you don't want friends you can't trust.
- Also remind him that you have a written agreement. Not only can you end your friendship, you can also sue him if you want to.
Step 5. Start sending non-payment notices
If you think you will have to sue him sooner or later, it is important to have paperwork. As a result, sending non-payment notices after 30, 60 and 90 days will help you draw a timeline should you sue them.
- Keep copies of letters and send registered postmarks so your friend can't pretend not to have received them.
- In the letter, indicate the terms of the loan and the date you should have received the payment.
Step 6. If you intend to sue him, tell him explicitly
Does your friend continue to be gnorri? This is where the going gets tough, especially if you don't believe his excuses. Contact them again by email, phone or in person. Calmly remind him that it was not your intention to get to this point. However, if he doesn't pay you back the amount he owes you by a certain date, you will be forced to sue him.
Remember that you risk offending him and ruining your friendship. However, if you value your money more than the relationship, that's the right thing to do
Part 4 of 4: Cause him
Step 1. Find out if it's more important to you to get back your money or keep this friendship
If you've been trying to talk to your friend and they apparently aren't going to stick to the deal, there are two avenues you can take. You can just give up and convince yourself that the money was a gift, or you can sue them to get what you deserve. However, in the latter case it is highly likely that your friendship will end.
- It may be worth suing him (provided you are well prepared for this by the time you disbursed the loan), even if it ruins the friendship. The decision depends a lot on the amount. A person who has received a large loan and does not care about the agreement is not a good friend.
- Remember that money "given" to a friend cannot be deducted from taxes, so this experience cannot be of any use to you from a tax point of view either.
Step 2. Prepare the documentation
If you have followed this article in detail, then you have prepared yourself for the possibility of a lawsuit, so you have a signed and authenticated document. The contract states that you have loaned money to your friend and that the latter is obliged to return it to you by a certain date. If you don't have a written contract, you can still report it; the problem is that in the absence of concrete evidence it will be difficult to prove your case.
- If it is an oral agreement, it is necessary to have a witness who can confirm it.
- Put aside any emails you sent your friend to ask him to pay you back the loan. This way you will have concrete documentation to prove that you have tried to solve the problem in other ways.
Step 3. If you want, hire a lawyer
At this point, you can hire a lawyer to guide you throughout the process. At first he can write a letter to your friend asking him to pay you back the money he owes you, otherwise you will be forced to sue him.
- Sometimes such a letter is enough to motivate a person to repay the loan.
- Remember that hiring a lawyer is not free. You will have to pay his fee, so make sure that the loan amount is higher than what you will spend on the lawyer's fee. Otherwise, even if you recover the money you are owed, you still risk losing it or reaching a breakeven point. This depends on the amount of the loan and the total legal fees.
Step 4. Contact a justice of the peace
Unless you have made a particularly large loan (over a certain sum you must go to the court), generally the situation can be resolved with the intermediation of a justice of the peace. If you have hired a lawyer, he will guide you throughout the process, but it is not always necessary to be represented by a lawyer - this depends on your specific case.
- If you decide to opt for out-of-court conciliation (i.e. without a lawyer), you need to apply to the office of the justice of the peace. You will then submit an application which will be filed with the registry; the judge will then schedule a hearing.
- If you decide to take legal action, a dispute will be established. You will be able to deal with it on your own or with a lawyer, depending on the value of the dispute and other factors.
- You and the other party - your friend - will have to appear before the justice of the peace, who will act as an intermediary to try to resolve the situation. If in the meantime your friend decides to pay you the sum you are owed, you will have to withdraw the complaint.
Advice
- If your friend isn't speaking and you can't reach them, they may be avoiding you because they feel embarrassed or can't pay you back. If so, send him a voice message or email. Give him an ultimatum: If you can't get in touch with him by a certain date, you'll be forced to sue him. Make it clear that you are willing to listen to his explanations should he call you back, but also that you need this money as soon as possible.
- If a friend of yours asks you for a large loan, it is possible that he does not have the right requirements to go to a bank. Sure, this situation can be justified under certain circumstances, but in case of poor creditworthiness your friend probably can't handle his finances and loans.
Warnings
- In general, lending money to a friend is a bad idea. If he doesn't give them back to you, you will have lost your friendship and money. Giving him a (small) portion of the money he asks for is a good alternative to a loan.
- If you are in a serious relationship, be sure to discuss it with your partner before giving a loan. If you lend all your savings to a friend without consulting her first and the money isn't returned to you, she'll get angry and won't forgive you that easily.
