How to lend money, what are the documents you should when you lend money?

One of my relative is in a big financial mess and it has become my responsibility to help him in this. I would like to make an agreement for the money lent. I have heard that you should take signature in a blank bond paper and take 3 cheques/ checks with the borrowers sign on it.

Is this valid, can some one help me in this?
The family system here in India emphasizes a lot on relationship and values, the person is from close family, so I am sucked in to this.

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0 Replies to “How to lend money, what are the documents you should when you lend money?”

  1. Of course
    The choice is yours
    Nobody under the sun can stop you from changing your profession.
    As a marketing professional you have many choices. It depends on your ability and choice.
    Go ahead ! Take the plunge.
    (And of course ! Cover yourself adequately!!)

  2. I’m not sure what you mean here, so I’m going to make guesses here..

    If you plan to leave the company, you can take your license(s) with you and work for a different company.

    If you plan to get licenses in other areas such as auto insurance or health insurance, you are allowed to do so. However, if the company you work at currently does not offer the other products, you may be able to work at 2 different companies. The only problem here is that it may cause conflict of interest and if there isn’t any conflict of interest, both companies will have strict policies on sharing clients. For example, if you sell life insurance for Company X, you can’t sell a product to the same client from Company Z.

    You can get other sales job that is totally different from insurance such as getting into real estate or selling cars or be an investment broker.

  3. If you want to draw up a legal and binding contract, and have advice as to what conditions to place on it and how you could enforce it, I would suggest contacting a lawyer.

    You could certainly request signed blank checks — or, predated checks made out for payment amounts — to try to force payments, but you still have no guarantee of funds being deposited to cash them with. I’m not sure what you mean about a signature on “blank bond paper” … generally the only thing legally enforceable is a contract, and a blank paper isn’t a contract.

  4. You DO NOT solve financial problems like that with money. You will bail him out, and in a few weeks he will be right back where he was. Also, you are mixing business and family, which is also a really bad idea. He got himself into it, he can cowboy up and get himself out.

  5. Never, never, ever, under any circumstances do you lend money to friends or family. Proverbs 22:7 says that “the rich shall rule over the poor and the borrower is slave to the lender.” Holidays at your realtives homes are going to be really interesting when your financial slave shows up.

    I’m curious as to how it has become your responsibility to clean up his mess. That is enabling the same as giving an alcoholic money for beer then cleaning up his mess.

    If you really want to help this person and you have the financial capability, give them the money. When the money is a gift, you do not expect repayment and it can be a spiritual gift to you. As a condition attached to the money, insist that he attend financial counseling, then offer to go with him. If he refuses, do not give him the money. That would help him as opposed to enabling his irresponsible behavior.

  6. You need to get your relative to sign a Promissory Note which binds him legally to the amount he / she borrows from you. This is evidence that he has borrowed and a Promissory Note is a negotiable instrument. If he defaults on his repayment with this Promissory note you can proceed legally but it will be civil litigation. In addition to the promissory note you can alsocollect a few checks totalling the amount lent plus interest if any. The checks have to be signed and duly filled up by the borrower but should not be dated. In the unlikely event of a default and if you decide to initiate legal action then present the first check and if it is returned unpaid by his banker for funds reason then you can file a criminal case under Sec. 138 of Cr PC. Unlike the civil case this criminal case is bound to put pressure on the offender and you can get your money. Take care that the checks are filled up by him and not you. If you fill up the amount with your handwriting then they can file a forgery case against you saying you stole the check leaves and forged the details. But its not legal or ethical to get signatures on blank stamp papers.

  7. As a chartered accountant,I would like to say a few things:
    1.Whatever documents/signatures/cheques u take,if u have to take a legal recourse ultimately,it is very costly,time consuming and ….
    2.If u really want to help him out,take two three persons into confidence and obtain their signatures as well as a witness on the documents u wish to get signed.
    3.U can get promissory note,post dated cheques etc.from him

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