Lending money is a touchy subject. It gets even more touchy during a down economy like the one we are currently in. It's not uncommon to be asked to be "bankers" for a loan to a family member who may need some extra bucks to get through unemployment, or maybe to make a down payment on a home.

This is a very important decision, and we want to help you make the right one. (Click here to read our full advice on loaning money to family or friends.) If you do choose to lend the money, your next step is to draw up an enforceable note. It may sound cold, but you need to protect yourself -- and without adequate proof, you could have all sorts of problems with the IRS.

We want to make this as easy as possible, so we've written one for you. Use our form letter below whenever you loan money:

This note is to confirm that I, __________, (hereinafter referred to as Lender) hereby loan the principal sum of _____ Dollars ($ . ) to ____________ ) hereinafter referred to as Borrower).

This Note bears interest at the rate of _____ Percent ( %), per annum. Monthly payments of principal and interest on this Note in the Amount of _________ Dollars ($ . ) per month, are due and payable on the ____ day of each and every month beginning with the month of _______, ____.

The principal sum of the Note shall be secured by _________ as collateral. Upon final repayment of the principal and interest due, Lender agrees to release said collateral from any liens or obligations in connection with this Note.

In the event Borrower defaults on repayment on this loan, or payment is more than 60 days late, Lender reserves the right to demand payment in full. Should Borrower be unable to make said repayment, Lender shall be entitled to claim the collateral property as payment, plus any collection and legal fees and expenses involved in reclaiming said principal amount.

The undersigned parties agree to the terms and conditions presented in this letter. Borrower acknowledges receipt of the said principal sum stated above. Lender acknowledges receipt of this document as a legally binding Note.

The parties enter into this Note and accept this Note as legally binding as of the date stated below.

____________________
(Borrower)

____________________
(Lender)

Date: __________

We want to help you find the right words to deal with any money problem. Check out our most popular form - our sample credit card cancellation letter.