The economic crisis is hitting homes hard. Consequently, financial organizations are more and more reluctant to grant financing. The loan between individuals becomes a preferred alternative for many people. With friends or family members, these “private loans” are often made outside of any agreement, so that it becomes difficult for the lender to prove their existence. Our lawyer takes stock of the various means of protecting you in the event that relations with your borrower deteriorate.
An authentic act or under private seal
The authentic instrument is a writing passed before a notary who has a probative value that can hardly be called into question. The private deed is a simple document written between the lender and the borrower.
In both cases, the full identities of the parties must be indicated, as well as the place and date of the conclusion of the contract. It will be useful for the contract to mention the amount loaned, the means of transferring said amount, the repayment terms, the legal interest rate, the duration and objective of the loan. It is always preferable that the borrower expressly declares having received the loan amount.
All parties must sign the contract, preceding their signatures with the words “Read and approved”. The contract must be drawn up in as many copies as there are parties.
For example, if you decide to lend $ 20,000 to your cousin who is married under a community regime. Three signatures will be required. Yours, that of your cousin and that of your cousin’s wife. It will be advisable to establish 3 original copies and each one will have his.
Another way to formalize the loan is the IOU. It is a unilateral written act whereby the borrower acknowledges that he owes a sum of money to another person, the lender. The acknowledgment of debt need not necessarily be drawn up before a notary. It can therefore be a simple private deed.
In principle, the acknowledgment must be written entirely by the hand of the borrower and kept by the lender until full repayment of the amount borrowed.
In the event that the acknowledgment is not entirely handwritten, it is necessary for the borrower to write with his hand the formula “good” or “approved” with the amount indicated in full.
The IOU must of course be dated, signed and mention the full identities of the parties. The parties are free to add other details such as the interest rate or repayment terms. Recognition does not have to mention the cause of the debt.
Recommendations for a loan between individuals
We can only recommend that you respect the formal rules surrounding the drafting of the aforementioned acts. Otherwise, these may be reclassified by the judge or simply be declared void. You will then have all the trouble in the world to prove the existence of the loan, except on the basis of repayments already made or on the basis of any letters by which the borrower confirm the existence of a loan.