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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4476
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Is there a way to offer someone a loan without creating the

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Is there a way to offer someone a loan without creating the uncomfortable situation of asking someone to sign an IOU?

Rakhi Vasavada :

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

Rakhi Vasavada :

Well... No. When you loans someone any money, it is required to protect your interest by getting an IOU signed, or securing your interest in any other manner such as taking a promissory note, etc.

Rakhi Vasavada :

Unless you do this, you are just lending the money on a "good faith basis" and if the person does not return your money, there will be no way you would be able to recover that. If you wish to secure your money, it is required that you document the debt.

Rakhi Vasavada :

Law does not prohibit you lending money without documenting it. BUT in case of a default, you tend to lose.

Rakhi Vasavada :

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards

Customer: replied 3 years ago.

Ok. This is not exactly what I looked for initially, so I would like to offer a follow up question based on your answer: what different ways exist to secure your interest when you loan money? Can you give more details about the 'promissory note' ? On a practical level, how can one be tactful about asking someone to sign an IOU?


Thanks

Dear Friend,

Hello and welcome. Thank you for for follow up question and allowing me to assist you further.

First the promissory note. It is little different from IOU. An IOU is merely an acknowledgment of debt. There are not other details mentioned such as the rate of interest, the date and time on which it will be repaid, etc.etc. It is also not much used in the practical world now a days.

The promissory note, on the other hand, does indeed acknowledge that a debt exists, but it also typically explains the following:

=>The amount of debt
=>The interest, if any, that will be paid on the debt
=>How and when the debt is to be paid
=>The parties
=>The date

The following is a good informatory resource.

http://www.ehow.com/about_5085622_rules-writing-promissory.html


There are many types of promissory notes. Kindly refer another excellent resource.

http://www.getformsnow.com/promissory-notes.html


Regarding asking someone to sign an IOU or a promissory note, the most diplomatic way would be to ask them and agree them to just document the debt. This way, you can mildly ask them to sign it. There can be no softer way to ask for that.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards
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