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TexLaw, Attorney
Category: Business Law
Satisfied Customers: 4430
Experience:  Internationational Commercial Attorney
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I entered into a contract with a friend. He took out a loan

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I entered into a contract with a friend. He took out a loan and gave me the money to run my small business. I agreed to pay back the loan as such:

The Borrower agrees to lend $41,995.00 to the lender for the purchase of SDM located atXXXXX City, State. The Borrower is to pay the Lender $41,995.00 in installments of $525.00 per month for eighteen months, after eighteen months Borrower is to pay the balance due by paying Lender 28% of his profits per month until the balance is paid in full. The first monthly loan installment is due on 7/10/2009.

Here's my issue: I have been making payments of $525 monthly since 7/2009. I sold the store by the end of 2009, and am still making monthly payments, but do I have to? There is no provision in my contract in regards XXXXX XXXXX happens if/when the business is sold, so am I still obligated to pay back the full amount of this loan? Do you think that would include interest?

Thank you for your question.

Although the payment terms of the loan do not address what would happen if you sold the store, this does not mean that you do not owe the balance of the loan. You do still owe the remaining balance on the loan. However, a loan has to specifically include a provision for charging interest and if this loan did not include any reference to interest, then you do not owe interest.

That being said, selling the store has violated the conditions of the loan. The lender has the right to sue you because you sold the business but did not pay off the loan with the proceeds.

That is something to consider. Does the lender know that you sold the store?

TexLaw and 3 other Business Law Specialists are ready to help you
Customer: replied 4 years ago.

yes, he is aware that I sold it. Thank you very much for your response.

If the lender does know, then you should think about talking to the lender about signing a new deal which clarifies your situation.

You said that he was your friend, so maybe he would consider lowering the amount due each month. On the other hand, trying to renegotiate the contract could lead to the inclusion of an interest provision.

In the end, if your friend is ok with you continuing the $525 monthly payment and is not charging you interest, then you are really coming out on top. A loan with no interest charge is "free" money.

Let me know if you have further questions or want to discuss more.

Best Regards,