The loan agreements, as they are called such loans, are subject to some rules that must be followed between the two parties. Even because borrowing money from a friend or family member can often result in a misunderstanding if the parties have not agreed to certain formalities in advance. This type of arrangement gives some advantages to the actors in that they choose the deadlines, amounts, forms of payment and interest. However, if you are considering availing this type of loan you need to be aware of how they work legally. Just check out the following points!
- It is necessary to sign a document
With regard to loans between $2,500 and $25,000, it is necessary to sign a document which lays down the rules for the loan, preferably with the signatures recognized by a notary, in order to avoid problems if this issue reaches a judicial level. Even in cases where the loan is less than these amounts it is recommended that you take precautions and sign a document recognized by a notary or solicitor. In case the loan exceeds $25,000, then you will have to carry out a public deed or a private document authenticated by a solicitor.
- What are the interest rates? How are they determined?
Another factor to take into account is that the interest charged on these loans is subject to ceilings. The interest can be decided between the parties, but can’t be higher than 3% (if there is a guarantee) or more than 5% (if no guarantee is given on the loan), against the legal interest rate in force.
- Set payment terms
Although this step is not mandatory, it is advisable to set a deadline for repayment of the loan. If you do not want to set a deadline but there is interest payment, be aware that any party involved can terminate the contract within 30 days. If there is no stipulated deadline, nor the payment of interest, if you request the payment of the loan in its entirety, you must give the other party 30 days to proceed with your repayment.
- What to do when debt repayment is not realized?
If you have defined the term of payment of the debt and this has not been done, know that you should appeal to the courts. If you have a notarized document proving that the agreed payment period has not been adhered to, it will be easier to institute proceedings.
Organizing a financial situation is not as easy as what is described in books. Sometimes we need to find quick funds to meet our daily needs. And since borrowing money from a bank isn’t as easy as a few decades ago, now we have to find more options. If you live I Florida you can try Fort Lauderdale Title Loans for example. But no matter how attractive the options offered, we must have enough emotional maturity to prevent us from falling into new financial difficulties. Hopefully this article can enlighten you about what is called private loans.