1. Loans

Whatever loan you arrange will have to be reduced to writing. If you deal with a bank or other institutional lender, it will have the necessary forms. However, if your arrangement is with a friend, family member or private investor, these details will probably be up to you.

If your loan is simple-a specific amount of money, at so much interest, to be paid at regular intervals-you can safely design it yourself. While a course in contract law is beyond the scope of this book, the sample notes provided may help you focus on this task.

However, if the loan involves complicated default provisions, security and balloon payments, you and the person you are dealing with would be wise to have it checked by an attorney. If you have done most of the work, this shouldnt be expensive; negotiate the fee in advance.

Example 1:

Promissory Note

Robert Lee of 1411 South St., Homer, Alaska and Gertrude Fox of 123 Main St., Fairfax, Alaska, agree that Gertrude Fox hereby loans Robert Lee the sum of Fifty-Six Thousand ($56,000) Dollars to be repaid on the following terms:

1.Principal and interest of 10% per year will be paid in equal monthly installments on the first day of each month beginning the first day of September 2000 and continuing through the first day of August, 2001.

2.On September 1,2001, the entire unpaid balance of principal and interest shall be due and payable in full.

3.Should Robert Lee fail to pay an installment on the date due, as set out in Paragraph 1 of this agreement, the whole sum of the principal and interest then outstanding shall, at the option of Gertrude Fox or any subsequent holder of this note, immediately become due and payable.

4.Should Robert Lee fail to meet any condition of this agreement, and should Gertrude Fox or any subsequent holder of this note take legal action to collect it, Robert Lee shall be responsible for all attorneys fees and costs.

Promissory Note

$8,639.00 July 30, 1999

For value received, the undersigned promises to repay to Sebastian Grazowtski, of New City, Oregon, the sum of EIGHT-THOUSAND SIX-HUNDRED AND THIRTY-NINE DOLLARS ($8,639.00) including interest at 12% per year. This money is to be paid in equal monthly payments of $315.00 (principal only) commencing on September 1, 1999 and continuing until November 1, 1999, at which time the monthly payments will increase to $440.61 per month until the entire balance of principal and interest is paid.

Should default be made in the payment of any installment when due, then, at the option of the holder of the note, the entire amount of the principal and interest shall become immediately due and payable. In the event of any default on this note, the holder shall be entitled to recover all