Pick A Repayment Plan

Typically, undocumented loans between friends and family are understood as "demand" agreements. Demand agreements allow the lender to ask for the full loan amount (including interest) after a specific period of time, or in some cases, an unspecified period of time (e.g. "pay me back when you can"). While a demand agreement may initially sound like a good idea, borrowers can find it difficult to come up with the money all at once.

Instead, Virgin Money recommends that the borrower pay back the loan in installments —usually monthly, though quarterly or annual payments can also be selected—by setting up a repayment plan. The following standard types of loan repayment schedules are available using our loan calculator.

• Amortized. The repayment schedule consists of payments that are always the same dollar amount and are due at regular payment dates (monthly, quarterly, or annually) for the life of the loan.

• Graduated. The repayment schedule starts with lower payments initially (monthly, quarterly, or annually) but they gradually increase over the life of the loan.

• Seasonal. The repayment schedule comprised of both principal and interest payments are lower during some months of the year and higher in other months of the year (typically used for situations where a borrower's income is different at different times of the year).

You can further customize your repayment schedule in several ways. You can:

• Add a deferment period at any point. This is a period during which no payments come due, commonly at the beginning, for anywhere from one to 12 months.

• Make a period interest-only. This is a period where only interest (no principal) is paid. When an entire loan is "interest-only," all payments include only the interest portion of the payment until the end, when the principal is repaid in one lump sum payment, often called a "balloon."

  Finally, many borrowers find their preferred payment schedule by backing into it. Using the Virgin Money loan calculator, you can fix the payment amount and frequency that suits your situation and the calculator will determine the length of the repayment period that way.