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Overview
"Can I borrow some money?" That is definitely not the approach you want to take when you are trying to arrange a personal loan from an individual. You need to treat this person the same way you would treat a bank; equipped with information and an airtight plan. Also, your past reputation is everything when it comes to getting a personal loan from an individual. The number one thing this person is going to want to know is, how he or she is going to get paid back and when. Put yourself in that other person's shoes.
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Step 1
Draw up a one page plan outlining your income and monthly bills. This plan should show that you are a good financial risk for a personal loan. -
Step 2
Draw up a tentative contact describing the personal loan. Include the amount of the loan you are seeking, the interest rate you are willing to pay, the amount of the monthly payment, and how many months you will take to repay the loan. Write your name and address on the contract, and leave a space blank for the other individual to fill out and sign. -
Step 3
Present your plan. Take your time explaining why you need the money, and your intention to pay the loan back in full. Be personable and completely truthful. Offer to put up collateral as a backup to the loan, such as a car, or another valuable item. Put these details in the contract. -
Step 4
If the person agrees, shake hands and go together to a local notary to have the forms notarized. You will both give ID, sign the contract in the presence of the notary, and get the official stamp. Get a copy of the contract so that both parties can have documentation. -
Step 5
Make your payments on time.
- Skill: Moderately Challenging
- Tip: You can usually set up an automatic payroll deduction to anyone's account, so for added assurance, you can offer to have the lender's monthly or biweekly payment directly deposited to their bank account every pay day.
- Tip: If your collateral is small, such as a piece of jewelry, give it to a trusted neutral party you both know, so that the lending individual will have peace of mind about being able to retrieve the the collateral in the case of a default.
- Warning:
- Don't be surprised if you get a letter from small claims court if you fail to pay back a personal loan from an individual.
