Personal loan Contract
What is a personal loan contract?
A personal loan contract is a money lending agreement between a lender and a borrower that outlines the terms of the money lending which must include the amount of the loan, interest rate, reason for the loan, terms of payment, and when the money should be repaid.
Personal loan
So I never quite get why people are constantly borrowing money from each other, it’s not something I practice, I really just prefer to live within my means, but I realize it’s definitely a part of our culture.
I have had two striking experiences of this, one was particularly bad. But Marie’s* story is much worse, she wants to share it with you.
Personal Loan Story
“So I found myself in 2013 building a house, I was in my mid 20’s, single female with no children. I had a spectacular job that paid me well and in another currency💪.
I was committed to making the right decisions about life💪.
Anyhow, I have a cousin who was going through hard times, she was about to be homeless with 3 children😨.
She never quite had a stable upbringing, her father lives abroad and she never had a stable life with her mother. She was either living with her mother or different relatives by her father’s side, throughout her teenage years and later on into adult life.
We knew she struggled terribly with self-esteem problems, which as her paternal family, we all rallied around her and did everything we could to support her emotionally, mentally, socially and financially. Especially myself, I always had so much compassion for her.
But she never could quite get on her feet.
Here I was, with my life together, she reached out for help and I decided to assist. I had no idea what I was in for!
I thought I was going to be the one who would get her on her feet finally💪. Her story is everybody gives up on her which is what she would say all the time. and I really wanted to be her champion and help her get her life together😇.
I helped her out a lot financially with groceries, rent etc.
Long story short, she moved in with 3 kids.
We made an agreement 🤝 that she would pay her way and buy her own food, since I had set her up with a small business etc.
In 3 months of her living with me, I realised she had borrowed more than $33,000💵💵💵, she tanked the business, she had stolen money from me as well as important legal documents.
I was not having it, I filed a motion in the Parish Civil Court to get all the monies back- not the ones I had gifted to her, just the loans. That was another hell! This court case lasted for more than 6 months, she denied everything. I had no proof these were loans.
It was emotionally draining and traumatizing. I was betrayed by someone, who I did everything in my power to help.
Tips on money lending:
Here is how to ensure this never happens to you. If you are someone, who is likely to provide family and friends loans, especially family. Ensure you have a Personal Loan Contract signed with them.
Some may be in a hurry to receive the money and promise to sign the document later… do NOT accept this.
Ensure the document is signed before handing over the money.
It’s all good when people are in need and wants your money, but once they have it, they become a totally different person.
Tips on money lending:
- Never feel pressured to lend your money
- If you decide to lend, you are in control. If after you have verbally committed to the loan and during the process something doesn’t feel right. Feel free to pull out of the agreement
- Ensure you sign a personal loan agreement with the person and do not let them convince you that it is ok to sign the note after the money has been handed over.
- Ensure you know the reason why the money is needed and it must be plausible to you and stated in the loan agreement document.
- Ensure you have a signing witness
- Ensure you have proof the money was handed over. Whether via bank transfer or a signed receipt.
Loan/Money Lending Law
Personal loans to family and friends do not have its own law. It is governed under the money lending Act of 1938, which is more dedicated to money lending institutions. But nevertheless, should still be interpreted to apply to personal loans.
Loan Interest
So here are the legal facts of lending to family and friends.
- You are not allowed to charge more than 20% interest, however, the typical rate is 6% simple interest of the loan amount.
Example, if the loan is $10,000 at a simple interest rate of 6%, on the due date the payment should be $10,600.
If the simple interest agreed was 20% on $10,000, on the due date the payment should be $12,000.
- If the borrower does not repay the loan and this goes on for years. The lender is entitled to 6-10% simple interest per year. This cannot be compounded.
Statute of Limitation
Statue of Limitation – The Money Lending Act suggests that a lender has up to 20 years within which to file a claim in order to recover their money.
Courts
The maximum you are able to sue for in the Parish Court is up to JA$1 million, anything above that will need to be handled at the Supreme Court. However, if a claim for less than a million is filed in the Supreme Court it will be heard by a Supreme Court Justice
Contract Notarization
Ideally a JP should witness the document in order to give the contract legitimacy in the event that a borrower suggests that the document is somehow prejudicial or defective. Pursuant to Article 8 of the Money Lending Act, a borrower would not be obligated to repay any loan if the contract to which he is bound is not in writing. The borrower must also be supplied with a copy of the duly endorsed contract.
Reason for the Loan in the Contract
All particulars pertaining to the loan such as the amount being loaned, the duration of the loan period as well as why the loan is being extended to the borrower must be included in the contract. The contract must also contain the interest to be applied in the event of default of payment, the nature of the security given (if any), and the date on which the loan was made.
Conclusion
I am sure you may know someone, who is constantly borrowing or someone who even lends money to people. You, perhaps may be that person, if so, then you should always sign a personal loan agreement contract to avoid disingenuous people or any sort of misunderstandings.
Get your Personal Loan Contract today and don’t be taken advantage of.
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