Pointers In Giving Credit
Lending money with interest is a good way to keep the cash flowing instead of keeping it inside a safety deposit box. It is better compared than depositing it in a bank because the interests are usually higher than the latter and the accumulation of income through interests is faster especially if you are lending money to more than one individual. However, despite the hefty monetary benefit that may be derived from such transaction, it comes with great risk on the part of the creditor. Some safeguards must be employed in order to ensure that the money you lent to the individual will be satisfied when it become due and demandable.
The following pointers that I will be giving you are necessary precautions which must be taken up especially if you are not a company with enough resources to take measures to protect your interests. This is ideal for those who take up money lending as a casual and not official source of income.
First, a background check must be made on the personal information, contact information, financial status, occupation, and assets of the prospective borrower. Do not just rely on the information provided by the borrower. If it is possible, conduct an inquiry to verify the veracity of the data about the borrower.
Second, if the borrower’s identity is not so established require him to have somebody to act as a guarantor in his behalf or a surety company so that the some one can be held liable to pay off debt in case the principal debtor failed to comply with the debt agreement. Either of the two can help get out of debt.
In case the prospective borrower cannot produce a guarantor or a surety company then better have him produce a bond. The bond is a valuable consideration that would be automatically yours in case he cannot pay the debt. It can be in the form of a pledge which is delivery of a thing to you subject to the term that it will be returned to the debtor once payment has been made. It may also in the form of chattel, or mortgage of specific real property. However, before you accept such securities, make sure that the ownership belongs to the debtor himself and that the property proposed to secure the debt is free from any lien.
If a contract of loan has been finally entered between you and the debtor then you must be especially vigilant when the date for the debt is about to fall due. It is usually the time when a debtor who does not want to pay off the debt, convey his property to some other person in order to escape his liability or circumvent his contract with you. Under the law, in order for your right to be realized and not merely inchoate, you must send a final demand letter informing him that the debt has become due and demandable.
There will be cases that the debtor would not be able to fulfill his obligation. I recommend that if he claims a remedy under Chapter 13 bankruptcy provision, then allow him to do so. It is better than not getting anything at all.
Tags: chapter 13 bankruptcy, help get out of debt, pay off debt