What is a Good Way to Renegotiate a Loan?

Q: Can I renegotiate the terms of a loan with a friend?

Yes, you can renegotiate the terms of a loan with a friend. It's advisable to discuss your financial situation and propose new terms that work for both of you. Make sure to document any new agreement in writing to avoid misunderstandings in the future.

Q: What is a promissory note?

A promissory note is a legal document in which one party promises to pay a specific amount to another party under agreed-upon terms. It outlines the repayment schedule, interest rate (if any), and consequences for non-payment. It's important to understand the terms before signing.

Q: Are verbal loan agreements legally binding?

Verbal loan agreements can be legally binding, but they are harder to enforce than written agreements. Without documentation, it may be challenging to prove the terms of the loan or the repayment schedule. It's always best to have a written agreement to clarify expectations and protect both parties.

Q: What is a secured note?

A secured note is a type of promissory note backed by collateral, which means the borrower pledges an asset as security for the loan. If the borrower fails to repay, the lender can claim the collateral. This reduces the lender's risk compared to unsecured notes.

Full question:

During 2007/2008 I borrowed a total of $12,500 in three separate loans from a friend during a period of financial hardship. I signed a promissory note which stated that I would repay the loans in full upon the sale of my home. I tried unsuccessfully to sell my home in 2008, using the services of a realtor. Although I am still experiencing financial hardship, I feel that I should probably start making good faith monthly payments as I don't want this to become an issue between me and my friend. My question is how much would a reasonable good faith monthly payment be? Also, am I legally obligated to make monthly payments since the note specifically stated that I would repay upon the sale of my home?

Category: Debts and Credit
Subcategory: Promissory Notes
Date: 04/07/2025
State: California

Answer:

Anything less than the required payment would be considered a breach of contract. What is required to be paid and when is a matter of the contract terms. I am prohibited from giving legal advice, as this service provides information of a general legal nature. If you feel the delay in sale has unfairly put hardship on your friend, I suggest discussing what you both feel is a fair renegotiation of the payments. If you modify or create a new agreement, it is advisable to put the modified or new agreement in writing. Please see the links to the forms below.

Promissory Note: A promissory note is a written promise to pay a debt and is typically signed at the time of the loan. It is an unconditional promise to pay on demand or at a fixed or determined future time a particular sum of money to or to the order of a specified person or to the bearer.

Cognovit Note: A cognovit note is a note in which the maker acknowledges the debt and authorizes the entry of judgment against him or her without notice or a hearing : a note containing a confession of judgment. This type of note is not valid in many States.

Collateral Note: A collateral note is a note secured by collateral. Same as a secured note.

Demand Note: A demand note is a note payable on demand from the person who is owed the money.

Floating Note: A floating rate note (or adjustable rate note) is a note where interest varies.

Recourse Note: A recourse note is a note where the default may result in loss of collateral and also personal suit and judgment. Most notes are recourse notes.

Renewal Note: A renewal note is a note that renews a previous note due date.

Unsecured Note: An unsecured note is a note that is not secured by any collateral but only the promise to pay (i.e. signature only is required to loan the money).

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What happens if I don't make payments on a loan to a friend?

If you don't make payments on a loan to a friend, it could be considered a breach of contract, especially if there's a written agreement. Your friend may feel frustrated or hurt, which could damage your relationship. It's important to communicate openly about your situation and consider making good faith payments to show your intention to repay.