So if you don’t want to lose friends or alienate family members, it’s vital to come up with some ground rules. The borrower needs to have a written plan for how they will repay the debt, the repayment schedule and some sort of collateral just in case. The lender also needs to know exactly how much they can afford to put up — and take into account that you may not get it back as soon as you’d like or (worst case scenario) at all. You also have to understand the tax laws regarding peer-to-peer loans. For instance, there is a minimum interest rate that you’re required to charge in order to declare the amount as a loan on your return. And for the sake of both parties, ALWAYS have a written, signed and (even better) notarized agreement.
