What to Do If You Loaned Someone Money and They Won’t Pay You Back

What to Do If You Loaned Someone Money and They Won’t Pay You Back

Lending money to friends or family is a generous gesture—but when the borrower doesn’t repay, it can quickly become a source of frustration, stress, and strained relationships. Whether you loaned $200 or $20,000, you have legal options to recover your funds without escalating the situation unnecessarily.

Here’s what to do if someone refuses to repay a loan—and how to protect yourself legally and emotionally.

1. Review the Loan Terms

Start by reviewing how the loan was made:

  • Was it a verbal agreement?

  • Did you write it down or use a formal contract?

  • Were there any messages, emails, or texts confirming the amount and repayment plan?

While written agreements are stronger in court, even informal messages or bank records can help prove the existence of a loan.

2. Revisit Your Communication History

Before assuming malice, check your communication with the borrower. Have they:

  • Missed one or more payments?

  • Communicated any hardship or delays?

  • Stopped responding altogether?

In some cases, a gentle reminder or open conversation can help clear up misunderstandings or lead to a modified payment plan.

3. Start With a Polite but Firm Request

If they haven’t repaid you by the agreed date, send a formal reminder in writing. Include:

  • The original amount loaned

  • The date of the loan

  • Any agreed-upon terms

  • The amount currently unpaid

  • A clear request for repayment by a specific date

Keep a copy of this message. Avoid shaming or threatening the borrower—focus on clarity and professionalism.

4. Offer a Flexible Repayment Plan

Sometimes the borrower truly wants to repay but is facing financial difficulty. Offer a few options, such as:

  • A revised payment plan with smaller amounts

  • A temporary pause with a future review date

  • A lump-sum settlement for a reduced amount (if you’re willing to accept less to resolve the issue)

Be sure to put any new arrangement in writing and have both parties sign it.

5. Avoid Public Shaming or Legal Threats on Social Media

It may be tempting to vent on Facebook or warn others about the borrower’s behavior—but this can backfire. Public accusations could lead to:

  • A defamation claim

  • Further deterioration of the relationship

  • Loss of leverage if the case goes to court

Keep the matter private and professional. If you need support, talk to a trusted friend or legal advisor—not your entire online network.

6. Send a Demand Letter

If reminders and negotiations fail, your next step is a formal demand letter. This is a legally formatted document that:

  • Asserts your claim

  • Summarizes the loan and missed payments

  • Requests full repayment by a certain deadline

  • Warns of potential legal action if the debt isn’t repaid

Demand letters are often more effective when written or reviewed by an attorney—they signal that you’re serious about pursuing the matter.

7. Consider Mediation

Before filing a lawsuit, you may want to explore mediation. This is a structured process where both parties meet (virtually or in person) with a neutral third-party mediator to reach a resolution.

Mediation is:

  • Less expensive than court

  • Confidential

  • Often faster and less adversarial

  • Sometimes required by small claims courts before filing

Local legal aid organizations, bar associations, or your LegalShield attorney can recommend reputable mediators.

8. Take Legal Action in Small Claims Court

If repayment still hasn’t happened, you can file a lawsuit in small claims court. This option is ideal for loan amounts typically under $10,000 (depending on your state).

To prepare:

  • Gather all documentation: messages, loan agreements, bank transfers, demand letters

  • Complete court filing forms accurately

  • Pay the required filing fee (often under $100)

  • Be ready to present your case in front of a judge

The borrower will be served with notice and given a chance to respond.

9. Collecting After a Judgment

Winning a small claims judgment is just part of the process—you still have to collect. Options include:

  • Wage garnishment (if allowed in your state)

  • Bank account garnishment

  • Property liens

You may need to request these through the court or with the help of an attorney. In some cases, collection may be difficult if the borrower has no income or assets.

10. Protect Yourself in the Future

After experiencing a broken loan agreement, you may be hesitant to help anyone financially again. That’s understandable—but if you do:

  • Always use a written loan agreement

  • Include clear terms: amount, interest (if any), payment schedule, and consequences for default

  • Avoid lending money you can’t afford to lose

  • Treat it like a business transaction—even with loved ones

This approach helps avoid confusion, protects your rights, and preserves relationships.

Protect Yourself with LegalShield
When someone refuses to repay a loan, LegalShield helps you respond confidently and legally. From demand letters to small claims advice, our network of experienced attorneys will support you through every step—without the high hourly fees. Protect your financial future and get the justice you deserve. Click here to learn how LegalShield can help you recover what’s rightfully yours.

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