Friend wants a personal loan @ 20% interest. What would you do?

[Scott V.]

Short summary of the situation: A friend of mine would like me to loan him approx $32k which he needs as a down-payment for something. I have a pretty good general idea of his financial situation and I know that he has access to lots of cash and could quite easily make this down payment on his own but since he has some cashflow property deals pending he would rather defer paying the amount. He has written up a contract for me to look over and it yields me a 20% cash return on the principal in 12 mo. with a personal guarantee on the loan and the interest if not paid in full at the 12 month mark. I've gone ahead and copied the text of the agreement and have redacted all identifying details. To those of you familiar with these types of arrangements, I'd love to hear your opinion since I'm not adept at personal lending. Hard to turn down a 20% return. Thanks in advance.

Repayment Agreement

This agreement is made between XX and XX

RECITALS

XX is in the process of buying a new XX

[item description]

XX desires to loan the down payment of this item from XX

XX desires to loan the down payment of this item to XX

In consideration of the promises contained in this agreement, the parties agree as follows:

COST OF RENOVATION

1. XX desires to loan the down payment of this item to XX, and shall provide cash, check, etc. (Estimated and not to exceed $32,800.00) to XX.

1. XX shall reimburse XX the total cost of this down payment (Estimated and not to exceed $32,800.00) in a 12 month period commencing on the date of execution of this agreement.

1. Additionally XX shall pay XX a 20% return on the (Estimated and not to exceed $32,800.00), which is to be paid at the end of the 12 month period commencing on the date of execution of this agreement. ( Interest estimated and not to exceed $6,560.00)

1. If XX does not reimburse XX the down payment and interest in the 12 month period. (Estimated and not to exceed $39,260.00) in a 12 month period commencing on the date of execution of this agreement. He shall pay this total personally via AMEX, funded through PayPal.

OHIO LAW TO APPLY

5. This agreement shall be governed by the laws of the state of Ohio.

WHEREFORE, the parties to this agreement have signed it on ___________ ___, 2019.

XX		XX
By: ______________________		By: ______________________
Name: ____________________		Name: ____________________
Date: _____________________		Date: _____________________