Private lending-Expired term but continued loan

[Raj G.]

Hi,

I did a private lending, term was 1 year. there was a clause that borrowed can extend loan (if lender is ready) for 2 times, each time for 3 months. but borrower has to pay 1 point for each extension(3months). so extension can be done total 6 months.

Now, after 1 year, borrower keep paying interest .

3 years went like that.

Now Borrower wants to pay off. in such case what should be Loan extension point added.

Thanks

[Beth Johnson]

Since you didn't have anything in your contract beyond the 2 3-month extensions for a point each, i would assume it could be contested legally as far as any additional points that would be paid for the extra time beyond the first 18 months since it's not in writing. I wouldn't be super punitive on this since you continued to accept payments monthly until they wanted to pay off. If you had a default interest clause in your promissory note and didn't enforce that and they still made monthly installment payments, for which you accepted each time, then you are in a sticky situation to require additional extension costs. If you thought they were in breach of their contract due to it being past maturity, you would likely have been advised legally to stop accepting payments. I've been told by my attorney (i'm a private money lending business owner) that we do not accept payments post maturity unless we do a new written extension or loan modification with agreeable terms. NJ has licensure requirements related to private loans so make sure you consult a real estate attorney to understand your legal rights and proper course of action.