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| *Ostroff, Fair and Company>>>Credit |
Consequences of Default on Loan from Friend? |
Me and my husband needed a loan of $50,000 to start our business. Our supposed "friend" offered to give us a loan and help us out with the business. the loan was supposed to be at 10% (said so in contract) until I figured out he was actually charging us 26%!!! My husband had already signed the contract. I tried to work with him on this, but he wouldnt budge. So I hired a lawyer and threatened to take him to court, has been over 4 months and still hasn't budged. I now have NO money to continue paying lawyer (already maxed out cards paying for other business repairs) and I cant afford to pay our "friend" much longer. Should I just stop paying all together? I know he could sue us, but then he would have to pay court costs, because we cant afford to take him to take him to court ourselves and he's screwing us out of alot of money. Should I just stop and use that money to pay off the rest of our debts? I know I'll eventually have to pay, but its not like they can take anything, right? Do your lawyers think you have a case against him? I would pay the loan off, if possible. Otherwise, he could go to court and get a judgement against you. You would probably pay his legal fees. On the other hand, if he is breaking the law, you could sue him and he would probably end up paying court costs. You would need to reread the contract and nail down the state/federal laws he is breaking and make sure taking him to court would be in your best interest. Edit: I like Steve's answer :) Lawyers are worse than your friend when it comes to screwing you out of your money. You need to let him sue you! He has to prove his case, you only have to defend. I believe it is illegal for an individual to charge more than standard lending fees. I also think your signature has to be on all the papers, before he can sue you. Just focus on the business and let him do his thing. If he gets a judgment, he then has to figure out how to collect, by that time you may be on top of the world, or ready to file bankruptcy. Either way, you will be in control, not him! If he sues you he can also sue you for court costs.... If all your paperwork is in check then why are you paying so much??? Didnt you have an attorney go over the loan documents? If not I have to assume this was sort of "home drawn" paperwork.... If the paperwork you have shows 10% then pay him back at 10%...That way you arent in default of the loan...if he sues you --- you can prove you have been paying your debt per the agreement. I'm not a lawyer; I'm an accountant. The Contract says $50,000 at 10% interest, 60 payments of $1,500. As you indicated, if you make 60 payments of $1,500 the interest rate is 26% (your "friend" is apparently ignoring that the contract says 10%). If I were you, I would interpret the contract a different way. I would ignore the 60 payments part. Instead, make 39 payments of 1,500 and consider the loan paid off (the 39th pymt should be 1,818 instead of 1,500). 39 payments equates to a 10% interest rate. By doing this, you've satisfied the intent of the contract and would have a strong case in any lawsuit. Oh, and when your "friend" asks for the 40th payment, tell him to go to hell! Even compounded monthly your "friend" is way off. I doubt he has a leg to stand on. I don't think you should default, but unless the contract talks about compounding I would pay him $55,000 and wouldn't worry about the rest. I doubt he is still your friend either way. In court it could get tricky if your husband had input into the way the contract was written. You may end up paying the full 60 payments, but that is extremely doubtful. However, if the man who loaned you the money wrote the contract and said take it or leave it then it may be seen as a "contract of adhesion." Any unclear parts of the contract will go in your favor. Maybe you could consider arbitration. I doubt he'd go for it. If you put it in writing it will show a good faith effort on your part, and could hurt his case if he tries to go to court. |
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