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If you're just loaning a friend a few bucks for lunch, you probably don't feel the need to write up any kind of formal agreement. But if you're going to be providing your friend with a more substantial loan – such as to open a business, pay off a debt, or make a down payment on a car or house – it's important to put your agreement in writing. Treating the loan as a business transaction rather than a simple favor may increase the odds that your friend will actually pay you back, and ensures the agreement is enforceable in court if problems arise. [1] X Research source