Legal Question in Credit and Debt Law in California
Personal Loan Repayment
My husband borrowed $12,000 from his sister in 2002 (before our marriage) and has made only 5 payments of $350 thus leaving a balance of $10,250. She has requested that he resume making ''reasonable payments within 30 days'' or she will take legal action. The question is this: Is there a minimum payment that we have to pay? We were planning to respond with a note indicated that we would be repaying the loan in monthy payments of $100 on or before the 15th of each month. This personal loan was never in writing, however in the letter she did note that she wasn't charging interest and allowed my husband to repay the loan at a more affordable rate (than the 350 initially verbally discussed.) There is no argument that this loan balance does exist. We were just wondering if we began payment (and continued until paid in full) is an acceptable action to avoid ''legal action'' on her part.
2 Answers from Attorneys
Re: Personal Loan Repayment
You have to pay a reasonable amount. What is reasonable depends on the parties and their expectations. Instead of writing back and forth, why not pick up the phone, call her, set up a payment schedule and then stick to it?
Re: Personal Loan Repayment
There's certainly no requirement that she be forced to accept less than payment in full; and her use of the word "reasonable" lends itself to much ambiguity.
Moreover, keep in mind that unless she has expressly waived interest on the money, she is entitled by statute to 10% interest per year. This can add up quickly.
If you don't dispute that you owe, why not pick up the phone and ask her if $100 is ok to pay? The worse she can do is say "no". If you want to avoid a suit (and undoubtedly strained familial relations), it's time to come up with a reasonable payment plan that you can live with.
This is another example of why borrowing money from family or friends is rarely a good idea. It is probably best to now treat the sister as a bank and make sure that the payments are on time. Once you are in a pattern of several payments having been made in the same amount at the same frequency, you will at least have an argument down the road (if she does file suit) that an agreement for repayment was reached on these terms.
Good luck.
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