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Loaning money to family and friends can be a delicate subject. You don't want to be too formal with the terms of the loan. Yet, if you don't write a proper loan note or a legally binding IOU, you could be kissing your money goodbye.
It's generally a good idea to protect yourself by putting the terms of the loan in writing. If your friend or relative protests, you could say that there are tax consequences and you'll need the note to keep the IRS off your back.
Here's what you need to know about writing a legally binding IOU or loan note:
Writing a legally binding IOU is remarkably simple, leaving you with no excuse for not having a loan note.
First, the note should identify, and be signed by, the borrower.
Other than that, there are really only three very basic things that need to be in promissory notes, and keeping it simple can help alleviate any fears that friends or family may have about signing the note. The three things to include in promissory notes are:
For complex loans such as those involving collateral or substantial amounts of money, you may want an expert set of eyes to review the terms of your loan. An experienced contracts lawyer can help to ensure your loan note is legally binding and, if needed, can also help you enforce the terms of your IOU.
Loan Agreement Forms (U.S. Legal Forms on FindLaw)
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.