Why a handshake loan turns into a dispute
Most disagreements over informal loans are not about whether money changed hands. They are about what it was: a loan, a gift, an investment in a business, or an advance against an inheritance. Bank transfers prove that money moved, but they rarely say why, and memories tend to shift once the relationship cools. A written personal loan agreement, often in the form of a promissory note, records that the money is owed, how it will be repaid, and what happens if it is not. When there is nothing in writing, texts and emails that mention repayment often become the main evidence, so they are worth keeping.
Terms worth settling before the money moves
The core questions are the amount, the repayment schedule, whether interest applies, and what counts as a default. Interest deserves care in New York, which has both civil and criminal limits on what private lenders can charge; a loan priced above them can put collection at risk, sometimes for the whole loan, and loans to companies are treated differently. Larger loans between family members can also raise tax questions, so it is sensible to ask an accountant how interest and any later forgiveness will be treated. If the borrower is a company, decide whether an owner will sign personally, because a business with no assets can leave a lender with little to collect. Collateral, if any, needs its own paperwork to hold up against other creditors.
When repayments stop
Before anything formal, gather the agreement or note, the record of each transfer and repayment, and any messages in which the borrower acknowledged the debt. A written demand is usually the first step, and its tone matters if you still hope to preserve the relationship. Depending on the amount, a claim may belong in small claims court, a local civil court, or the state Supreme Court, and a signed note can sometimes support a faster route than an ordinary lawsuit. Time limits apply to collection claims, and a later payment or written acknowledgment can affect how they run, so do not assume the claim stays available indefinitely. When you call us, we review what the paper shows, whether the borrower can realistically pay, and whether a negotiated payment plan makes more sense than a judgment.
