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Beware Borrowing Money from Friends (and Strangers)

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Would you agree to pay 90% interest on a loan? Poor Toni apparently did, posing a scary question to Bankrate.com’s Steve Bucci. Apparently, Miss Tony borrowed $1200 and the lender is demanding $90/mo. in interest – or 90% annual simple interest (i.e. not compounding). The answer that Bucci gives is funny because he gives two of them after a few words of advice about borrowing money in general.


  1. Always get the terms – Get the duration of the loan, the repayment terms (the lender wasn’t accepting Toni’s payment of $1200), etc. in writing before accepting the money. $90 interest on a $1200 is ridiculous.
  2. Check your state usury laws – Most states have caps on how much interest can be charged, that’s why many credit card companies are incorporated in Delaware (no cap!).
  3. Don’t borrow from unsavory characters – Because they’ll break your legs for $50, depending on their level of unsavoriness (I know I just made up that word).

To Toni, he suggested that, if this was a friend or someone reasonable, she write a letter offering a reasonable interest rate (15%) via U.S. mail, certified, return receipt requested (paper trail) and see if the lender accepts it. If it was an unsavory lender, pay it off and be done with the headache.

As a side note, Bucci did suggest a great website to read up on lawyerly stuff. And yes, I made up “lawyerly” too.

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