Technically, handshakes are considered enforceable loan contracts. Nevertheless, having the terms of repayment in writing offers you concrete proof that as a lender, you intend to impose the repayments terms of the debt.
The lack of a repayment schedule consequently makes the rules governing the loans complex. So, to avoid backlash between family members for the sake of the family history, a repayment schedule needs to be set. The borrower might decide to either pay the debt monthly or annually.
Even after the loan has been issued, the paperwork needs to be maintained. Both the lender and borrower should record whenever a payment is made plus track the loan balance. With remarkable recordkeeping, both family members will have an idea of the loan status.
You should charge interest rest as set by the governing tax body. Typically, the lowest interest varies depending on whether the loan is long-term (more than nine years), mid-term (more than three years but less than nine years) or short-term (three years or less). As a lender, this is necessary to avoid having to pay taxes on the interest you have not earned.