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.

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