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Precautions to be taken for lending money in India from US
05-Oct-2023 (In Civil Law)
Hi, I want to lend some money, around 20Lakhs to multiple parties for 2% interest rate. I live in US so cannot meet the other parties in person. Considering these factors, could you let me know the PRECAUTIONS/PROCEDURE I need to follow to make sure I have all the legal rights to make the borrows repay my lending amount in case they default the principle/interest.
Dear,
There are many precautions to be taken while lending money to third parties. Please note that you cannot charge interest amount on the lent amount without having a valid money lending license. If you do not have the license, obtain the license first. While lending amount to the borrower, make sure that you lend the money through account payee cheques only to make sure that there is a proper record of payment. Apart from this, you may also need to enter into agreement with the borrower mentioning the reason for lending and other terms and conditions such as repayment and a separate clause mentioning the steps to be taken in case of default in repayment of the amount borrowed. Obtaining blank cheques from the borrower is good as if the borrower fails to repay the amount within the specified time, you can conveniently fill up the cheques and present the same with your banker. If the cheques get bounced, you can initiate criminal proceedings against the defaulter of the cheques.
There are many precautions to be taken while lending money to third parties. Please note that you cannot charge interest amount on the lent amount without having a valid money lending license. If you do not have the license, obtain the license first. While lending amount to the borrower, make sure that you lend the money through account payee cheques only to make sure that there is a proper record of payment. Apart from this, you may also need to enter into agreement with the borrower mentioning the reason for lending and other terms and conditions such as repayment and a separate clause mentioning the steps to be taken in case of default in repayment of the amount borrowed. Obtaining blank cheques from the borrower is good as if the borrower fails to repay the amount within the specified time, you can conveniently fill up the cheques and present the same with your banker. If the cheques get bounced, you can initiate criminal proceedings against the defaulter of the cheques.
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Adv. B. Srikiran
Hyderabad | 500+ Answers
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