DEFINITION of 'Friendly Loan'

A loan agreement between associates. This type of loan is known as a friendly loan because the agreement is usually made between friends, family or acquaintances. These types of loan agreements are rarely legally documented and stipulations are usually verbally agreed upon.

BREAKING DOWN 'Friendly Loan'

Friendly loans are the most common type of loan agreement, whether it be among friends, family or associates. In many circumstances, failure to repay such loans can not be legally challenged, as most friendly loans are made in good faith between closely associated parties. These loans, however, are also not reported to the credit bureau and do not reflect one's credit score.

RELATED TERMS
  1. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  2. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  3. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
  4. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  5. Commercial Loan

    A debt-based funding arrangement that a business can set up with ...
  6. Credit Agreement

    A legal contract in which a bank arranges to loan a customer ...
Related Articles
  1. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  2. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  3. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  4. Managing Wealth

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  5. Managing Wealth

    How to Lend Money to Family and Not Regret It

    It’s hard to refuse a family member’s request for a loan, but be sure to go into such arrangements with your eyes open.
  6. Personal Finance

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  7. Personal Finance

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  8. Personal Finance

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
RELATED FAQS
  1. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  2. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  3. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  4. Federal student loan rates: who sets them, why they vary

    Federal student loan rates are set by Congress, not by banks. Learn more about who gets what rate, and how often they get ... Read Answer >>
Trading Center