Although there is no 100% guarantee that you will get your money back, you can take some precautions to secure a repayment by mitigating the risk of potential nonpayment. First and foremost, make sure to properly record all lending & payment terms, interest rates mutually agreed upon, and dates, even if you are lending money to your own family members, relatives, or friends.
A written contractual agreement can hold more clout than a verbal one as it will avoid any future misconceptions or memory lapses. Don’t feel uneasy about putting a contract in place for family or close friends. They won’t mind if they are really sincere about repaying you. Make sure everything you agree upon is recorded accurately and clearly so that you are protected on all ends including potential tax audits. A simple way to record a loan and its terms is by utilizing a "Promissory Note".
A promissory note is a financial or legal instrument which is signed and used as a promise to pay a specified sum of money by a certain date from one party to another. Promissory note templates can be found in various formats online. Here are some tips to remember when deciding to utilize a promissory note:
Download Sample Promissory Note or Letter for lending money overseas: (Courtesy Tony Mecia)
Different countries have different tax implications. In the U.S., there are different exemptions on loans, gifts, or earned income. The principal and the interest on a loan may have different tax stipulations, and the rules can change if the debt is canceled due to nonpayment. A loan is usually not taxable due to the repayment, however it is best to inform and discuss with your CPA about other potential situations that could arise when lending money overseas.
Yes, you can get it back through legal ways under the applicable regulations. Depending on the amount, you may not get it back all in cash, as it must satisfy the applicable customs rules etc. But a bank transfer is always possible.
Learn more about the federal rules that protects the customer sending money overseas, visit New Remittance Federal Rules.
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