Lending money to one of your family members can become a very daunting business, and that`s why it`s important to be very clear when establishing a family credit agreement. Before considering creating a personal credit agreement between friends or family, here are a few things to consider: this contract does not contain any security or surety clauses. If you want to use a guarantor, this document may be more appropriate. A person or business can use a credit agreement to set terms such as an amortization table with interest (if any) or the monthly payment of a loan. The most important aspect of a loan is that it can be adjusted to its liking by being very detailed or just a simple note. In any case, each credit agreement must be signed in writing by both parties. In addition, it is better to have the letter signed in front of a notary, although in most cases this may require a low fee. If this is not possible, at least have the letter signed by the witnesses. When it comes to this credit, being strictly professional and requiring written agreements can be difficult to manage. Before entering into a credit agreement between friends and family, several factors must be discussed and taken into account.
Make sure you have taken everyone into account before an agreement is signed and a down payment has been made. Whether or not you should lend money to a friend or family member is a personal decision. Only you can answer. First of all, you need to be sure that you feel comfortable in this situation. Especially when we know that the situation becomes unpleasant and even leads to a permanently damaged relationship. If it is a loan used for medical bills or help to pay the rent, consider the needs and their monthly situation before choosing the loan. Collateral – A valuable object, such as a home, is used as insurance to protect the lender if the borrower cannot repay the loan. When it comes to family loans, taxation is the most critical issue in this situation. For example, if you make a zero-interest loan above the IRS donation threshold, you will have tax debts. The lower your creditworthiness, the higher the annual effective annual rate of charge (note: you want a low effective annual interest rate) for a loan, and this is usually the case for online lenders and banks.