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[Blogger's Note: This is an interesting article titled "SECURING DEBT TRANSACTION" from Bikoy's site intended for those who are engaged in debt transactions. I hope you may find salt in this article as the PINOY BLOGGER had.]

Unless you intend to give your money away to strangers and to your friends then don’t read this blog. As between friendship and relationships- although there’s trust involved its best that the debt or money borrowed between friends or relationships is secure. Secure means there’s evidence of the debt, its not floating around in the air. I know that some people can live with a person’s palabra de honor or a person’s word- but its best that a debt is secured by something written in paper. 

 How does one secure a debt transaction?

1. Promissory Note- This is simply a piece of paper with the words “I promise to pay Mr. Smith the amount of P1,000.00”- and you have to include the date when that amount is due and where he or she will pay. Would a receipt of an amount suffice- well if its an exchange of money for goods yes- but in case of debt no, a receipt only shows the person got money it does not mean he or she is indebted. Some people just jot down the amount put the date on it- that’s also a no-no if you want that debt collected later on.

If you want the loan to bear interest then put it in the promissory note. Otherwise, there’s no stipulation as to whether the loan will earn interest or not. 

2. Checks- If the other person, the debtor has a checking account have him issue a check for the amount borrowed- with the date on the check being the date when the loan matures. Note that the debtor or creditor might agree not to deposit that check but if you’re the creditor I’d advise you to deposit the check on the due date and let the check bounce for fear of the check becoming stale later on. 

3. Real Estate Mortgage- you can have a lawyer prepare this for you its document stating that a piece of property whether titled or not is being made subject as collateral for the loan. This applies when the money borrowed is really huge but it does not mean automatically that you as creditor become the owner of the property if the debtor does not pay- you still have to foreclose the mortgage or sue the debtor for the loan.

4. Loan Contract- prepare a loan contract through a lawyer if you want it clearly stating all the terms and conditions- (a) duration of the loan (b) interest or penalties if any (c) and the date when the loan would be due and demandable. 

 Can you bind another person for the loan? Yes- he could be a guarantor or a co-maker.