The law regulates money lending. This is one key thing to note when lending money to family and friends or even anyone.
However, would I still need to obtain a money lender license if I am lending to a close family or friend and on what grounds would I be exempted?
Even if it’s possible, what steps can I take to ensure that I am well able to recover my loan particularly when it concerns family and friends?
This is the focus of our post.
Lending Money To Family And Friends In Nigeria
In Nigeria, loans given to family/friends are seemingly difficult to recover as a result of mixed feelings between parties involved. What measures can I take to ensure I recover my loan with ease?
Before delving into this, it is vital to determine if you would even require a license to lend money out to family/friends.
The lead law on money lending is the Money Lenders Law of Various States. The law requires anyone carrying on the business of money lending or advertises or holds himself out as carrying on the business of lending to obtain a license. This presupposes that only those carrying out money lending activities as a business-or going on concern are mandated to obtain the license.
Now, what must I do before giving out loans to family and friends?
2 Things To Do Before Lending Money To Family and Friends
1. Engage a lawyer
This singular steps defines the trajectory the next courses of action will take as they affect the lending made. This is vital to severe emotions from reality. With a lawyer involved, your interests and that of the other party are impartially represented leaving no one unduly advantaged. This leads us to the next point.
2. Prepare a Loan Agreement
Ensure you have your lawyer draft a loan agreement to cover the particular money lending transaction. The loan agreement should take into account the credit history of the prospective debtor, propensity for timely repayment and also include standard terms typically provided in a loan agreement. The maturity loan date, interests accrued and penalties upon default should be stated. More importantly, the collateral as well as the mode of recovery in the event of failure to repay should be included.
Lending money to your family/friends should not be a lost cause if you take the proper steps.
Doing this will help in your loan recovery with family/friends.
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References
Unini Chioma, “Can Someone Who has no License Lend Money? What the Law Actually Says?” available at https://thenigerialawyer.com/can-someone-who-has-no-license-lend-money-what-the-law-actually-says/ accessed on November 29 2023
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