What Is A Friendly Loan?

A loan given to a friend, relative or any known person which does not carry any rate of interest is called a friendly loan. The said friendly loan does not constitute any commercial transaction between the parties. Mostly, such friendly loans are without any written agreement and it is based on trust. There is no legal recourse to recover a friendly loan, in absence of written agreement. Though, a Civil Suit can be filed in the court of law on the basis of an oral agreement but the courts are reluctant to admit the suit of the person in the absence of a written agreement and chances are that the lender losing his case, time and money. It is advisable to get sign a promissory note at the time of giving such friendly loans. Though, a promissory note is not a contract. However, it is a written promise to repay the friendly loan and a legally enforceable document which states the date of repayment of the loan and the amount. It is also an admission on the part of the borrower of the debt he/she owes to the lender.

The above information is to impart awareness and no part of this should be construed as providing legal advice for any purpose.

Vikram Kumar

Advocate