Someone owes me money, how do i set up a loan?

Question

Someone owes me 42,000$ and he can not pay back immediately. He wants to set up a loan contract. Which type of loan and what stipulations will yield me the most money.
Currently i collect 600$ every 4 weeks until the loan is paid off. However he will not pay it off as he can not see paying 600$ on a small number, as this will not fare. Therrefore i told him we would change terms of loan, however what is comperable or better to this current agreement. Initially i lent him 35000 with the agreement to recieve 42000 and 600$ every 4 months until payed.

although he pays 600$ each month it does not lower the principal. He pays me 600$ until he gives me the total 42000. He has already paid me 7,200 , as i have been collecting 600$ each month for 1 year. But he still owes me 42000, which is what i really want.

Answer 1

Before you come up with some complicated loan agreement, you should get a lawyer involved. All you have to do it add some term into the contract that is not legal and then this guy can use that to prevent you from enforcing the contract. I think that there are laws that specify exactly what a loan agreement should have in it, such as length of loan and interest rate. Get some legal help. It will cost you, but it can save you a ton of money in the future. It will definately be a heck of a lot cheaper than trying to sue the guy for the money later if something goes wrong.

Answer 2

You have already established the term and interest rate
$42,000 divided by $600 is 70 4 week periods or about 5.4 years. Using Excel, the annual interest is about 6.9%
I am not sure what you mean by not paying off by paying $600 on a small number - does he think $35,000 is a small number? or are you talking about the last payment, which he thinks is less than $600? If you use a proper amortization program, you can show him equal payments right down to a few cents. The simplist way to deal with an odd final amount is simply to make the last payment smaller. If paying a mortgage company, a series of early payments (like aways on the 1st instead of the 15th when due) will reduce the number of payments by one or two. But I assume you are not going to recalculate that constantly.
Most of what he pays early is interest and later more and more principal.
Here
http://www.hsh.com/calc-amort.html
is an amortization schedule. You can jigger around with the interest rate but you will have to deal with the fact that almost all tables are for monthly payments (more than 4 weeks) and will show a larger amount.

Answer 3

Draw up a note that specifies how much is owed, the interest rate, when each payment is due, how the interest portion of each payment is calculated, late fees if payments are not made by the pre-determined date.

And be sure to include a clause that defines when the ;loan is to be considered to be in default (e.g. when a payment is not received by 10 days after the dues date). And specify that when the borrower defaults the entire balance is immediately due in full.

Including an amortization schedule that shows date of each payment, amunt of interest, amount of principal and remaining balance will be good too.

And specify how payments are to be made (e.g. by check payable to John Smith and mailed to a certain address, postmarked by the 15th of each month).

If you are going to accept cash, specify that a receipt is to be given at the time any cash payments are made so the borrower cannot argue that he paid by cash and got no receipt.

You can very likely buy a fill-in-the-blank note at an office supply store.

Answer 4

Good, now thats enough to start a good novel. Keep on writing.