- Consider talking to the person who owes money in a friendly manner and focusing on the facts, not emotions.
- Enlist the help of family or friends who know both parties to offer moral support in repayment.
- Document the debt with details such as name, amount, interest rate, and signed agreement for use in legal action if necessary.
- If all other options fail, consider taking legal action with help from a lawyer or debt collection agency.
People often lend money to those they know for a variety of reasons. Many people do so because they are close friends or family members and want to help them, even if it’s not the best financial decision. Others may lend money because they feel obligated, like when a parent gives their child a loan. Lending money to someone you know can also be a way of building trust and showing support.
In fact, according to a 2018 survey by TD Bank, 43% of respondents said they had lent money to someone they knew in the past six months alone. Of this group, two-thirds were lending between $100 and $5000 – with about 20% lending over $5000 – demonstrating the prevalence of these types of loans among those close enough to one another to borrow money.
As with any loan, there is always the risk that the person will not pay back what they owe as agreed. However, it is often difficult for people to take action against those who refuse to pay back the debt they owe due to personal relationships or other factors such as being low on funds themselves or feeling uncomfortable addressing the issue head-on.
Still, your needs might be immediate, making collecting past-due debts necessary. Here are a few steps to consider.
Engage with the Person Directly
When someone owes you money, the best solution is to approach them in a friendly manner. Talking to them directly about their debt is one of the most effective ways to encourage repayment. A diplomatic approach can help both parties feel heard and understand each other’s perspectives.
When addressing the issue, it is essential to focus on the facts and avoid emotions like guilt or blame. Please explain why you need the money back, such as for rent or bills, and then allow them to explain why they cannot pay. Understanding their reasons may reveal alternatives that could benefit both parties.
Additionally, listening to what they say can present an opportunity for compromise. This could include offering a payment plan with more lenient terms than the original agreement, allowing them extra time before payment is due, or including smaller fees over a more extended period.
It helps if you can be open-minded in these conversations and try not to insist on getting every penny back right away. Offering some incentive or reward for total repayments – such as forgiveness of late fees or interest – may also provide an incentive for people who are otherwise unable or unwilling to repay their debts in full.
Reach Out to Loved Ones
If engaging with the person has not resolved the debt, it is sometimes beneficial to involve a third party. This could be an attorney or mediator, depending on the situation and size of the loan.
Another option is to enlist help from family members or friends who know both parties and can offer moral support in repaying debts. These loved ones may have insights into why someone is refusing to pay back their debt and be able to intervene in a way that does not come across as confrontational or aggressive.
They may even provide financial support for the person, allowing you to get paid back without needing further action.
Document the Debt
Having a written record of the debt can be very helpful in collecting past-due payments. This document should include the amount borrowed when it was due to be repaid and any late fees or interest accrued since then.
This information will not only remind you of what is owed but also lend credibility to your case should you pursue legal action to collect unpaid debts. Here are a few pieces of information to include in the document:
Name and contact details of the borrower
Getting this allows you to send reminder letters or phone calls if the person does not respond to your initial requests for repayment.
Amount of debt owed
Including the amount due and when it is scheduled for each payment helps clarify how much has been borrowed.
Interest rate information
Accurate interest rates will ensure you know how much more money is owed than the original loan amount.
Copy of signed agreement
Having proof of a verbal or written agreement between both parties can provide evidence in case legal action needs to be taken against someone who refuses to pay back their debt.
By documenting the debt, you are also legally protecting yourself should you pursue other courses of action, such as small claims court or a collection.
Take Legal Action
Unfortunately, some cases are where threatening or taking legal action is the only way to get someone to pay back their debt. Hiring an attorney or debt collector may be your last resort if you have exhausted all other options.
A lawyer will help you understand the laws and regulations surrounding debts, including how much time you have before they can no longer be collected. They can also walk you through filing a lawsuit and advise on what evidence would best support your case in court.
Unfortunately, the person who owes you money might not be reachable. As a result, you should consider getting subpoena server services to deliver legal notices. Subpoena servers are mandated by the court and can be used to serve papers promptly, ensuring that they get received.
Finally, consider talking to a credit counselor or financial advisor for further advice on handling debt collection. They will be able to provide you with options based on your situation and may even have helpful suggestions on what steps you can take next if the person still refuses to pay back their loan.
It can be frustrating when someone refuses to pay back the debt they owe. Before you take action, please try to get in touch with them directly and understand why they cannot or will not repay what they borrowed. With patience, understanding, and an open mind, it may be possible to reach an agreement that works for both parties.