Hi, I want to lend money to my friend. What are the precautionary measures that I should take to ensure I get my money back in sometime?
Get an agreement signed from him and obtain a post dated cheque duly filled and signed by him. The fact regarding post dated cheque with cheque number and amount should be incorporated in the agreement. The purpose for lending money should also be incorporated in the agreement. The purpose for lending should be legal. Money shall not be given in cash but through cheque or through RTGS.
firstly take a cheque of any future date.
Secondly take his signature on an agreement, which you have to draft through lawyer.
Thirdly take his signature on a promisory note.
You can execute an agreement and can take cheque for precaution for said amount
Your friend should give in writing that he has received x amount as friendly loan and he would repay the money within period of 12 months or so
take post dated cheque for loan amount . Transfer funds into his account by NEFT or issue cheque for loan amount
If possible transfer amount from your account to his account and along with that you can execute an agreement with him and take a cheque from him. Explain cheque in that agreement.
If you are giving cash then also an agreement and a ticket be pasted on that on which obtain his signature.
There must be 2 witness of that agreement but you should make witness of your family or person who will depose in your favour
Get a loan agreement signed by your friend. Make at least two witnesses.
If you are lending money to your friend there will be no interest component and you can take cheques of similar amount so that in case he denies the payment you can deposit the cheque in bank to get your money otherwise it will be good to go for cheque bouncing case please make sure that you are making payment through Bank transfers as you are not a money lender you cannot charge any interest on the paid amount
Get signed a Promissory Note and below that a MOU of all terms and conditions on it along with two witnesses and same agreement can be registered with registrar.
1. Do make a written agreement executed on a non judicial stamp paper which is called Promissory Note.
2. In the said pro note do mention the time period clearly about the date of refund of money .
3. Do get his signature pasted and signed over it by the borrower.
4 Get signature of at least 2 witnesses on the said pro note.
It will be better to execute an agreement with your friend and also get a cheque for the same.
in case he fails to return the amount you will have be the documents so that you get your money back easily.
pay the amount through bank and not cash.
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Dear Sir,
What precautions should be taken while lending/accepting friendly loans?
All loan transaction should be by account payee cheque or bank draft
If you are giving loan which is interest free ensure that loan is out of your own savings and not from interest bearing borrowed funds.
Be cautious regarding creditworthiness of your lender.
Is there any legal document so that you can clearly define the terms and conditions of a friendly loan?
There are two ways of doing this:
PROMISSORY NOTE (or)
LOAN AGREEMENT
A Promissory note is a written promise to pay a debt. It is a financial instrument, in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed, determinable future time or on demand of the payee subject to specific terms and conditions.
If you wish to keep it simple and only for the record, go for a promissory note. This instrument comes under Section 4 of the Negotiable Instruments Act, 1881, and has to be signed by the borrower.
A Loan Agreement (Loan Contract) acknowledges that there is a loan, specific promise to pay and also states that the lender has a right to recourse. An example can be a FORECLOSURE. If you want to have a right to recourse, then go for Loan Agreement instead of a Promissory Note.
Clear Agreement should execute on 500rs stamp and do not include interest. And take post dated cheque as security.
Take promissory note duly filled and signed in presence of witnesses.
Further you may take a cheque duly filled and signed by your friend.
If the amount is huge, make sure that the same is paid through bank and you file ITR also.
you may enter into a loan agreement, you may obtain a promissory note executed by the borrower before two witnesses to the extent of loan amount with clear details of the interest rate and period of loan within which the borrower should return the same with interest.
If necessary you may even obtain a collateral security for the loan amount, if the same is huge amount.
you can take a promissory Note from your friend and also a post dated cheque in which the loan amount is filled up so that you can recover your money legally from your friend.
