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Refinancing Private Loans During the Current Crisis

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By: Lauren Doyle, Esq. 

During the current crisis many individuals have suffered a substantial loss of income due to job loss, reduction in hours, or temporary business closure. This reality has resulted in people reevaluating their current debts and obligations.

In the last few weeks many clients have requested to refinance personal loans, including loans between friends, family, and businesses. For example, a few years ago one small business owner agreed to buy out his partner over time and pursuant to a promissory note that required substantial monthly payments. The parties are on good terms still, and the borrower requested an extension of the time to repay the loan. We were able to quickly amend the current loan terms to allow the borrower to stop monthly payments until the current crisis is over and extend the loan due date. In another case, we amended a loan to allow the borrower to just make interest only payments until the borrower’s business is operational again. In both cases, this was a great financial relief for the borrower and it gave the lender assurance that the debt will still be repaid, just on different terms.

In addition, some individuals are seeking new private loans to support them during this time where their income may be reduced or eliminated. Loans from friends and family are helpful, but should always be documented in writing in the form of a promissory note. Without documenting the loan in writing, there is no guarantee that the money will ever be repaid to the lender. From the lender’s perspective, it’s also important to have some security for the repayment, so that if the borrower fails to pay, the lender can still access the borrower’s assets to secure repayment. We have been assisting clients in preparing these promissory notes as well as deeds of trust and security agreements to secure the debt.

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