Legal Loan Requirements and Why You Should Follow Them
The practice of borrowing and lending money is a daily occurrence. Friends borrow each other money and families do the same. You may wonder whether that is a legal loan. The answer is a resounding “yes.” Nevertheless, there are legal provisions that govern money-lending practices. If you have a bad feeling about borrowing from a certain lender, the best thing is to run a background check. If the lender has a website, look for consumer reviews. These are the remarks posted by people who have dealt with the lender before.
The reviews will give you a deep insight as to the type of person the lender is. Read them and find out what clients went through. You can also check whether the trader is listed in the business bureau website. Go to the website where individual moneylenders are listed and confirm whether your prospective lender’s name appears there. If it does then it means you are safe. Not every loan is a legal loan. For example, if the lender engages in illegal practices such as money laundering, any agreements you enter with him are illegal.
No law makes it illegal to lend or borrow money per se. However, the circumstances may nullify this freedom. Before you borrow money, confirm whether the lender is licensed. You can seek advice from an attorney on how to go about borrowing money from non-bank institutions. A legal loan is governed by some simple rules. Both the borrower and lender should sign an agreement committing each to their side of the bargain. In the event of breach of contract, the signed documents become evidence in a court of law.
Verbal agreements are the easiest to breach. You only need to deny that there ever was a transaction in the first place. Nowadays, even friends and family members are taking extra precautions when lending and borrowing money. It is important that everyone is clear as to the amount, interest charged and the repayment period. In the case of payday loans, the repayment is soon after you receive the next paycheck.
A legal loan agreement should be filed with a lawyer. Always have a witness with you. On the other hand, before you append your signature to such a document, take your time and read it. Make sure you understand all its contents. If you come across some terms whose meaning you do not understand, ask the lender to explain.