Repayments

The borrower should make sure the payments are according to the terms in the Promissory Note and make sure that the loan is repaid on time. The lender and borrower should make sure that they have read and understood the terms in the promissory note.

Set Up the Payment Plan

The payments should be set up in a way that provides for a clear and transparent record of payments. The best way is to use Electronic Fund Transfers (EFT) which these days can be readily made using your internet banking service. Cheques also provide a record of payment, but are less transparent and can get “lost in the mail”. The least ideal is payment in cash which must be documented with a receipt.

Pay on time

If you don’t pay on time you are breaking your agreement and that can strain your good relationship with your lender. Normally there will be a grace period specified in the promissory note. If the payment is made after the grace period then you will incur a late fee as per the promissory note agreement. The best way to always pay on time is to set up automatic payments from your bank. This service is normally available with your internet banking. If it is not available you should have an alternative system to make sure you don’t miss a payment.

Loan Reports

You should keep track of the progress of your loan and prepare reports at the end of periods specified in your promissory note. End of financial year reports should be prepared for accounting and tax purposes.

Use a Third Party

Having a neutral third party to administer your loan is a great way to look after your loan and has many benefits. The third party can keep records of all payments and prepare the end of financial year reports for tax purposes they can also mediate in disputes and help to renegotiate the loan payments or even help to take action to recover the loan. Because they are at arm’s length, they can eliminate any possible misunderstanding or distrust which may arise between the borrower and the lender.