Write a clear IOU when you lend money, and before you guarantee someone else's debt, think about whether you are willing to pay it for him
- Top value
- Evidence A
- Saves money
- Free
- Takes minutes
- No willpower
In plain words
An IOU should be complete: lender, borrower, amount, interest rate, term, way of repayment, with both signatures. Send the money by transfer, not cash, and a complete IOU is easier to sue on. When you guarantee someone's debt, check whether the word "joint" (连带) appears. With an ordinary guarantee (一般保证), you come in only after the creditor has sued the borrower and could not collect. With a joint-and-several liability guarantee (连带责任保证), the creditor can come straight to you for the money.
- Cost
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Free. Use one sheet of paper to state the lender, the borrower, the amount, the interest rate, the term and the way of repayment, and both sides sign. Send the money by transfer so it leaves a trace, and don't hand over cash.
- What you get
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A loan contract should be in written form, and its content generally includes the type of loan, currency, purpose, amount, interest rate, term and way of repayment. A complete one is easier to sue on. If a guarantee contract does not say which kind of guarantee applies, or says it unclearly, it is treated as an ordinary guarantee (一般保证). The guarantor under an ordinary guarantee can wait: the creditor must first sue or go to arbitration and then apply for compulsory enforcement against the borrower's property, and only if the debt still can't be repaid after enforcement does it become your turn to repay for him. On the other hand, once you sign a "joint-and-several liability guarantee" (连带责任保证) you have no such protection, and the creditor can come straight to you (China)
- Notes
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For money you lend, the courts do not protect the part of interest above 4 times the LPR (loan prime rate); see §7. Writing the ID number on the IOU and marking it "loan" is practical experience. Whether a guarantee has the word "joint" (连带) decides whether you stand behind the borrower or are pursued alongside him, so read it clearly before signing. If you were told you would be a guarantor but what you actually sign is a loan contract, see §8.45 (the borrower is you, not the guarantor).
- Evidence grade
- A : Specific numbers from meta-analyses, large cohorts or randomized trials; for law and policy, the statute or official text.
- Sources
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- 全国人大 (2020). 民法典（第六百六十八、六百八十一、六百八十六、六百八十七条）. https://www.spp.gov.cn/spp/fl/202006/t20200602_463888.shtml
Mentioned in
- Rights have deadlines: 3 years for the limitation period in civil lawsuits, 1 year for labor arbitration, and after that the other side only has to say "it's past the limitation period"
- Refuse when an acquaintance asks you to "scan your face and be a witness" to take out a loan, or asks you to read out a verification code: this is called an AB loan (AB贷), and the borrower is you, not a guarantor
- When collecting a debt, don't hold or lock up a person, and don't follow them home and refuse to leave
- A large sum your spouse borrowed alone does not automatically become your debt if you did not sign or ratify it
- Don't sign a personal guarantee on a company loan, and your spouse shouldn't sign along with you
Translated from the Chinese original. Original book, section 8, tip 18. This section describes legal rules, mostly mainland China’s. It is general information, not legal advice; for your own case, talk to a lawyer. Content may be out of date and rules differ by place. When you actually deal with an agency, a doctor or a court, follow what local officials, doctors and lawyers tell you. Disclaimer