However, it is important to note that family credit contracts are completely unsecured, since the person lending the money is a family member or close friend. This means that there are no assets as collateral in case the family member does not repay the money. So how can you get your money back if the family member or friend doesn`t respect the agreement? Well, the only solution you will have is to go through a lawsuit or a small appeals court. This way, you can be sure to get your money back legally from your family member. A loan agreement is a very complex document that can protect both parties involved. In most cases, the lender establishes the loan contract, which means that the task of including all the terms of the agreement rests with the lender. If you haven`t already signed credit contracts, you`ll probably want to make sure you understand all the components so that you don`t be able to protect yourself during the loan term. This guide can help you create a solid credit contract and understand more about the mechanics behind it. Please note that where there is a bank also lending to your children, some banks want you to confirm that money is a gift rather than a loan, so involve your broker in this interview if you want to protect your contribution with a loan contract. Borrowing is an important obligation, regardless of the amount, which is why it is important to protect both parties through a loan agreement. A loan agreement not only describes the terms of the loan, but also serves as evidence that money, goods or services were not a gift to the borrower. This is important because it prevents someone from getting out of the refund by claiming it, but it can also help you make sure it`s not a problem with the IRS afterwards.
Even if you think you may not need a credit contract with a friend or family member, it`s still a good idea to have this in place just to make sure there`s no problem or disagreement about the terms later that could ruin a valuable relationship. Lending money to a family member or friend can be a mockery task. It goes without saying that money can create problems and solve all your problems in the same way. For this reason, financial involvement often ruins relationships with family and friends. This is why most financial experts advise against borrowing a family member or friend.