Proper etiquette for loans from friends
The standard approach is to reach an agreement and put it in writing. What you agree upon is up to you, but in the US if you want to avoid gift taxes larger loans need to be properly documented and must charge at least a certain minimal interest rate. (Or at least you must declare and be taxed upon that minimal income even if you don't actually charge it. Last I looked, the federal requirement was somewhere under 0.3%, so this isn't usually an issue. There may also be state rules.) When doing business with friends, treat it as business first, friendship second. Otherwise you risk losing both money and friendship. Regarding what rate to charge: That is something you two have to negotiate, based on how much the borrower needs the money, how much lending the money puts the lender at risk, how generous each is feeling, etc. Sorry, but there is no one-size-fits-all answer here. What I charge (or insist on paying to) my brother might be different from what I charge my cousin, or a co-worker, or best friend, or... If both parties think it's fair, it's fair. If you can't reach an agreement, of course, the loan doesn't happen.
"Just to go against the grain here. Sometimes, loaning money to friends is the right thing to do. For example, they had a loved one die, and need the money to cover funeral expenses until the life insurance pays out. Here, you may consider it your ethical duty to loan the money (or you may not). It does not make sense from a financial point of view (you are unlikely to charge interest and you are taking all the risk), but sometimes you put your financial prudence aside because ""being a good person and a great friend"" is more important. It is true that the general rule should be not to loan money to friends, and particularly never loan money you cannot afford to lose. But there are exceptions to every rule. I'll note that you may be best off with a plain-english, non-lawyery contract. Make it absolutely as simple as possible. As others have pointed out, specify a repayment date or schedule. Note what happens if they miss the deadline. Specify interest, if appropriate. Get it signed by you and the other person. And make sure you consider what happens if your friend doesn't honour the agreement. For that kind of money, it is also worth considering collateral." What you are describing is perfectly legal, and is well under the threshold to attract the attention of the IRS ($10K+).  The money is not income, because it is repayment for goods provided or a loan made to your friends.  I do this myself oftentimes to take advantage of the rewards on my credit cards.  With cash to cover expenses coming in immediately from friends/family, there is virtually no risk. If you are concerned and want to protect against questions in the future about the source of the money, you ought to start keeping records of dates, times, locations, amounts, and the names of people involved when the charges are made.  Then track the dates when the cash is deposited into your bank account.  That way you can demonstrate the cash flow (Charge -> Repayment -> Deposit) to anyone who needs to know. You need an accountant and/or a lawyer who is familiar with the US tax code and the rules in South Korea (assuming from your tag). As the interest will be money generated in the US, you could be required to withhold some of the interest and remit it to the IRS (I believe 30% withholding rate). Since South Korea is a treaty country, your friend can complete and sign a form W8-BEN and give it to you, so you may withhold a lower amount. Your friend would need to file a return if too much was withheld. They may also get taxed in South Korea. There are probably rules in South Korea about minimum interest that must be charged, similar to Applicable Federal Rates for the US, so check with your accountant or lawyer for this. If you craft it correctly, you will be able to have a loan as a mortgage (with the house properly secured), which then would allow you to deduct mortgage interest rates from your return. As far as I am aware, there is no maximum amount for loans. "Money relationships are the opposite of friend relationships. That's why there's so much danger in loaning money to a friend - if the transaction doesn't work out well for one of you, it can destroy the friendship. Many of the answers here suggest you be prepared for the possibility that your friend will not pay you back. This is called a ""gift"". Give your friend the money, and trust that they will feel grateful. That gratitude will create generosity, and they will in turn seek to give gifts to you and to others in your circle. If you're not ready to give money to your friend, then you're better off not doing it. If you are ready to give money to your friend, then do it without expectation of return." A friend recently bought an 800€ TV on 0% financing. Sounded like a sensible thing to do. Why pay 800 when you can pay 80pm for 10 months? It took 30mins to set up the 'loan'. She had to sign all kinds of documents, giving away much personal information (age, employment info, income, email address etc). She now has a financial relationship with an institution which has nothing to do with the item purchased. She is bombarded with all kinds of financial offerings. She regrets taking out the finance. She had the money. The hassle and the unwanted links to banks make the deal unattractive. Perhaps she should have tried to make a cash deal... The advice above is generally good, but the one catch I haven't seen addressed is which specific laws apply.  You said that you are in Arkansas, but the dealer is in Texas.  This means that the laws of at least two different states are in play, possibly three if the contract contains a clause stating that disputes will be handled in a certain jurisdiction, and you are going to have to do some research to figure out what actually applies.   One thing that may significantly impact this issue is whether you were in TX or AR when you signed the contracts.  If you borrowed the money in TX, and the lender is in TX, then it is almost certain that the laws of Texas will govern.  However, if you were living in AR at the time you acquired the loan, particularly if you were in AR when you signed the papers, you have a decent case for claiming that the laws of Arkansas govern.  I don't know enough about either state to know if one is more favorable to the consumer than the other, but it is a question you really want to have answered.  That said, I would be shocked if any state did not have provisions requiring the lender to provide a copy of the terms and a detailed statement of the account and transaction history upon request.  Spend some time on the web site of the Texas attorney general and/or legislator (because that is where the lender is, they are more likely to respect Texas law) to see if you can track down any specific laws or codes that you can reference.  You might also look into the federal consumer protection laws, though I can't think of one off hand that would apply in the scenario you have described.   Then work on putting together a letter asking them to provide a copy of the contract and a full history of the account.  As others noted, make sure you send it certified/return receipt, or better yet use a private carrier such as fedex, and check the box about requiring a signature. Above all you need to get the dialog transferred to a written form.  I can not stress this point enough.  Everything you tell them or ask for from here out needs to be done in a written format.  If they call you about anything, tell them you want to see their issue/offer in writing before you will consider it. You do not necessarily need a lawyer to do any of this, but you do need to know the applicable laws.  Do the research to know what your legal standing is.  Involve a lawyer if you feel you need to, but I have successfully battled several large utility companies and collection agencies into behaving without needing one. In short getting funds converted outside of the Banking channel is illegal in India as Foreign Exchange is still regulated. If you show only a credit from your friend's NRE account to your NRO account [note it can't be your NRE account], it would be treated as GIFT and taxed accordingly, else you would have to show it as loan and pay back. You may show the payback in USD. But then there is a limit of Fx every individual can get converted/repatriate out of India and there is a purpose of remittance, all these complicate this further. "Without all the details it's hard to tell what options you may have, but none of them are good.  When you cosign you are saying that, you believe the primary signer will make good on the loan, but that if he doesn't you will. You are 100% responsible for this debt. As such, there are some actions you can take. First, really try to stress to your friend, that they need to get you outta this loan. Urge them to re-finance with out you if they can. Next look for ""better"" ways of defaulting on the loan and take them. Depending on what the loan is for you could deed-in-lue or short sale. You may just have to admit default. If you work with the bank, and try not to drag out the process, you will likely end up in a better place down the line.  Also of importance is ownership. If you pay the loan, do you get ownership of the thing the loan was secured against? Usually not, but working with an attorney and the bank, maybe. For example, if it's a car, can the ""friend"" sign over the car to you, then you sell it, and reduce your debt.  Basically as a cosigner, you have some rights, but you have all the responsibilities. You need to talk to an attorney and possibly the bank, and see what your options are. At this point, if you think the friend is not that much of a friend anymore, it's time to make sure that any conversation you have with them is recorded in email, or on paper."