Existing Debts

• 1). Look up the usury limits for interest rates in your state. You cannot legally charge a rate higher than this. In addition, look up the applicable federal rate for the time when you make the loan. This is the minimum interest rate you are allowed to charge. Choose an interest rate between the two that you think is fair to charge.
  
  
• 2). Tell the person that the bill is due and that you will begin charging interest on the bill if it is not paid by a specific date. Set the date at least one week in advance to give the person time to get the money together.
  
  
• 3). Divide your chosen interest rate by 100 percent to convert it to a decimal for use in calculations. For example, if you are charging 5 percent interest, divide by 100 percent to get 0.05.
  
  
• 4). Divide the annual interest rate by 365 to calculate the daily interest rate. In this case, it is 0.000137.
  
  
• 5). Multiply the daily interest rate by the amount owed to calculate the interest each day. For example, if the person owes you a bill of $1,000, multiply it by 0.000137 to calculate that you charge $0.137, or 13.7 cents, each day.
  
  
• 6). Multiply the daily interest by the number of days it takes the person to make a payment to find out how much interest the person owes you. For example, if he pays you $400 after 15 days, $2.05 goes toward interest and the remaining $397.95 reduces the balance to $602.05.
  
  
• 7). Repeat Steps 5 and 6 with the new balance owed to calculate how much interest to charge out of each payment until the bill is paid in full.
  
  

Making New Loans

• 1). Discuss the terms of the loan with the person you are lending to before giving any money. Plan an amount to loan, interest rate, how long it will take to repay, payment due dates and late payment penalties. Use Step 1 of Section 1 to help you select an interest rate.
  
  
• 2). Plug the loan amount, interest rate and loan term into an online payment calculator to amortize the loan into a specific number of equal monthly payments.
  
  
• 3). Write a promissory note that includes all of the terms of the loan. Make a copy for each of you and have both of you sign and date both copies. This contract will give you legal leverage if the person fails to repay the loan.
  
  
• 4). Collect the payment amount each month according to the amortization schedule you calculated. If the person deviates from the amortization schedule, use Steps 3 through 6 of Section 1 to calculate the remaining loan balance after each payment.