Sometimes it happens that our friends or family members apply to us and ask to lend them some money. And there are lots of people who start thinking if lending money to others is legal. If you would like to get a quick and short answer then yes, it is. But as every form of lending it has its specificity. You can lend money to anyone if you want. But it’s important to keep in mind that every state has its laws controlling money lending. Quite often these regulations don’t apply to individuals but in case you want to make the process safe then it’s better to apply to a local attorney and get a professional’s advice.

Legality of the Process

Lending money is legal in every state. Basically, it’s your human right to help someone financially if you want it. There are laws and regulations for financial institutions, organizations and companies for which lending money is a business. As for individuals, they can lend money to each other depending on their personal wish. But if there’s a need to sign documents or take other formal steps depends on the details of every particular deal.

Interest Rate and Collateral

For example, if a person you really trust to asks you to provide a loan, you may not charge any interest because it’s someone you love and you just want to help. But there are occasions when lending money can be risky and it’s reasonable if you want to charge some interest or take collateral. Every state has special laws which limit interest rates a lender many charge on a personal loan. These laws are different is every states and there are many differences between them. If you want to provide someone a loan and want to take collateral then it’s necessary to create a security agreement.

Protect Yourself

There’s always an agreement between the borrower and the lender. And main intention of this agreement is to protect the lender and assure him/her that the borrower will not fail to repay the loan. But it’s easy to understand that verbal agreements can’t provide you enough protection. Moreover, verbal promise is extremely easy to break. That’s why it’s better to put your agreement in writing, set repayment schedule and terms of agreement. Then you will feel more confident and in case something will go wrong you’ll be able to prove this agreement in court.

Life is full of different situations. Sometimes providing someone a loan is safe enough but quite often it’s extremely risky. Remember that you’re the only person who is authorized to decide “to be or not to be”. If you have serious doubts then you can always offer a person asking you about a loan some alternatives. Today there are lots of lending services available, for example, it’s possible to get a secured personal loan in a bank, apply to Canadian payday loan lenders, use P2P lending or turn to a local credit union. And it’s not a full list. Trust yourself but don’t forget to consider all the pros and cons before making a final decision.