Can a personal lender require interest on a loan if the note did not provide for it?
Full Question:
A relative needed to borrow money (several thousand dollars) for equipment for his business. A friend of his insisted on loaning it to him so he wouldn't have to go thru a bank and pay a bunch of interest. He didn't care how long it took to get his money back and since my relative was having some financial problems it has gone on for five years with no payments. The relative did sign a promissory note (he never did receive his copy) but there was no mention of any rate of interest to be paid, only that he did borrow the stated amount and promised to pay it back. He now has plans to pay off the loan and his friend has told him he owes him a little more than 150% of the original loan amount. The relative planned all along to pay him some interest but can the friend legally add interest on to the loan without it having been stated in the promissory note? At the time of the loan, the relative could probably have gotten a better interest rate at his bank. Also, aren't both parties supposed to get a copy of the promissory note? Should the relative pay the 150% or send his 'friend' the original loan amount plus a thousand or so for the use of his money?
05/15/2007 |
Category: Debts and Cr... ยป Promissory N... |
State: Iowa |
#4875
Answer:
This would depend on the terms of the promissory note. Yes, it is typical that both parties receive a copy of the note. The note may also address late payments.
