A friendly loan agreement is a written contract between two individuals that outlines the terms of a loan. It is often used when one person lends money to another person, such as a friend or family member. The agreement can help to protect both parties in the event of a dispute.
In Malaysia, friendly loan agreements are legal as long as the lender does not charge excessive interest. The Moneylenders Act 1951 regulates the lending of money in Malaysia.
So how much of interest is reasonable and legally valid? It is advisable to charge not more than 5% per annum of interest to ensure that the agreement is legally valid and enforceable under the law.
There are many reasons why someone might choose to enter into a friendly loan agreement. For example, they may need money to cover an unexpected expense, such as a medical bill or car repair. Or, they may be looking to improve their credit score by making regular payments on a loan.
Whatever the reason, it is important to have a written agreement in place to protect both parties. The agreement should include the following information:
Here are some additional tips for creating a friendly loan agreement in Malaysia
It is important to discuss these terms with the borrower and to get everything in writing in the friendly loan agreement. This will help to avoid any misunderstandings or disputes down the road. This is particularly important even if both lender and borrower are close relatives or friends.
Conclusion
A friendly loan agreement can be a helpful way to lend money to a friend or family member. However, it is important to have a written agreement in place to protect both parties. Remember that it is better to be safe than sorry.
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Wilson is a property & probate lawyer and can be contacted directly at 011-2644 4268 (Call/WhatsApp)