Set Up a Loan
After deciding to do a private loan the borrower and lender should use the Fosik Private
Loan Kit to document the loan by following the steps below.
Agree on the Terms
It is necessary for the borrower and lender to agree on the terms of the private loan.
These terms should then be set out on the Promissory Note in this kit. The terms should include:
The Interest Rate. This is the percentage of the loan amount (the Principal)
that the lender charges the borrower for the use of the money. It is expressed as a percentage
of the sum borrowed. It is paid in addition to the repayment of the Principal. It can be as low
as zero (0%) or an amount as high as legally agreed.
Security. Security is something (collateral or a mortgage) that is used to
make sure that the loan will be repaid. Personal loans are not usually secured. However, sometimes
security may be required. To set up the security the borrower makes a contract with the lender
about an asset, such as a car or TV, which is transferred to the lender if the borrower cannot
repay the loan. The easiest way to set up security is with the Fosik Security Agreement at the
back of this loan kit...
Repayment Plan. The repayment plan sets out the agreed schedule of repayments.
A repayment plan can be as simple as regular monthly payment of the same amount until the loan and
interest is paid or a single lump sum payment at the end of the loan period. Or it can be structured
in a way to best suit the needs of the borrower or lender. Examples of different options for
structuring a private loan are in the section called How to Structure a Private Loan.