Final Answer:
The given statement "When borrowing money from a family member or a friend, the loan should be in writing and signed by all parties to avoid any possible misinterpretations" is true because a written and signed loan agreement is crucial when borrowing money from a family member or friend to prevent misunderstandings and conflicts later on.
Step-by-step explanation:
When it comes to borrowing money from someone close, such as a family member or friend, it might seem unnecessary to formalize the arrangement with a written contract. However, this step is essential to ensure clarity and prevent potential disputes. Firstly, a written agreement outlines the terms, including repayment schedules, interest rates (if applicable), and any other conditions agreed upon. By having these details documented and signed by all parties involved, it minimizes the risk of misunderstandings or differing recollections about the loan's terms.
Moreover, a written contract serves as a form of protection for both the borrower and the lender. It delineates the expectations and obligations of each party, establishing a clear framework for the loan. In case of any disagreements or discrepancies in the future, the written agreement stands as a legal document that can be referred to for resolution. Without such documentation, it becomes challenging to prove the specifics of the loan arrangement if disputes arise.
Additionally, a formalized agreement can safeguard the relationship between the borrower and lender. Money matters can strain even the strongest of relationships. Having a written agreement helps maintain transparency, trust, and accountability, reducing the potential for misunderstandings that could jeopardize the personal relationship.
In essence, while it might feel uncomfortable to treat a loan from a family member or friend as a business transaction, having a written and signed agreement is a prudent step. It protects all parties involved by clearly outlining the terms, mitigating misunderstandings, and preserving the relationship between borrower and lender.