• Security when Lending money to other

Dear sir, I am going to lend 2 lac rs to my office colleague, He promised me to return me next month. For purchasing new home, he need that money. I wish to give him money. This money is my whole PF which I just received. My question is that for my security what should I do. I want all this to be in written, shall I use 100rs stamp paper or more than 100. If any other advice please help me.

Thanking you.
Asked 2 years ago in Civil Law from Mumbai, Maharashtra
Take a cheque from him for Rs.2 Lakhs. Are you only helping him out of friendship or is there any interest component to be paid for the amount you are lending? If you are charging interest, then you should be a registered lender and in that case you can take promissory note signed by him.  If you are not charging any interest and the transaction by you is only to help your friend, then on a plain paper write everything about the transaction including the cheque No. & the purpose of helping your friend and take his signature
Shashidhar S. Sastry
Advocate, Bangalore
1236 Answers
59 Consultations
5.0 on 5.0
1) dont advance any money . your friend can easily take a personal  loan . 

2) if your friend fails to repay it will ruin your friendship . 

3) if you still want to go ahead take a cheque for said amount along with letter from your friend wherein he agrees to return Rs 2 lakhs advanced next month . 

4) give loan only by cheque . no cash payments please
Ajay Sethi
Advocate, Mumbai
23206 Answers
1218 Consultations
5.0 on 5.0
1) frankly if you want to earn money invest in mutual funds . these days mutual funds with 5 star rating are giving more than 30%returns 

2)i am not in favour of advancing my life savings of 32 years to a friend . 

3) if you are charging 3%per month interest ie 36%pa  then you need a moneylender licence . this is not a friendly loan
Ajay Sethi
Advocate, Mumbai
23206 Answers
1218 Consultations
5.0 on 5.0
if  your friend refuses to repay loan you will be running around courts and spending money on legal fees to recover your hard earned money . best avoid
Ajay Sethi
Advocate, Mumbai
23206 Answers
1218 Consultations
5.0 on 5.0
I sincerely feel that you should drop this idea. Your 32 years of life savings will vanish into thin air. Still if you want to pursue and to have money lender's licence, you should make an application on your letter head to the concerned department( in some states to the commercial tax department and because it differs from State to State) to obtain licence.
Shashidhar S. Sastry
Advocate, Bangalore
1236 Answers
59 Consultations
5.0 on 5.0
1. If you have the capacity to sustain the loss in case he refuses or fails to return you the said amount, then only you venture in to this project. It is not run easily,

2. Moreover, you can not take interest more than the RBI prescribed rate & for lending money you shall have to take license as per the Act which you do not have,

3. If you still want to lend the said amount, calculate the interest amount upto the period he has planned to take the loan say upto 1.7.2015  i.e. Rs.2 Lakhs + Rs.72,000/- being 36% yearly interest for one year and take a MOU signed on Rs.100/- stamp paper duly notarised for the total amount of Rs.2,72,000/- shown as taken as loan but pay him Rs.2 lakhs through cheque. Take 5 Money Receipts for notional  payment of Rs.72,000/- in cash in 5 equal minstalments of different dates,

4. Even after this securede measures, the repayment and recovery through due process of law  can not be guaranteed.
Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
230 Consultations
5.0 on 5.0

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