How to Collect on a Verbal Loan Agreement

Updated November 22, 2016

When you have a signed contract, you have a better chance of collecting an outstanding loan. A verbal loan agreement is more difficult to collect, but if you have enough facts, figures, data, and evidence, you can eventually collect the money that's owed you. There are certain steps you will need to take. First contact the debtor and try to work out a repayment arrangement. If this does not work, you may have to seek legal action.

Gather your facts and evidence. If you don't have a contract, you will need as much evidence as you can gather. Determine if there is a paper trail for the money you loaned. When you go to the bank and get a cash advance on a credit card, the date of the transaction will show up on your credit card statement and the bank will give you a receipt. If you withdrew money from your bank account to extend a loan, this transaction will show up on your bank statement. Recall if there were any witnesses to the transaction. The debtor may have told someone he was borrowing the money from you. Make a note of what the money was borrowed for as well as the date, time, and repayment arrangements.

Go to the district court in the county where the defendant lives or where the business transaction was conducted and complete a small claims application. The application will include your name and the defendant's name as well as your version of what happened and why you are suing. Once it's complete, there will be a flat filing in the amount of £22, but the amount can vary from state to state and court to court. Verify you claim is within the amount handled by small claims. Some courts have a maximum of £1,950 for small claims and some have £3,250.

Wait for the writ of summons. You and the defendant will receive a writ of summons that states you both should attend the trial. The date, time, and location of the trial will also be listed on the summons. The trial is usually at the courthouse. These type of cases are handled by magistrates, which are court-appointed attorneys. Notification will go to the defendant in the form of certified mail with a return receipt. Also note some courts will let you choose from three different methods to have the defendant notified. The first method is having the sheriff department handle it. They will attempt to give the defendant notification, in person, three times. You can also decide to have a private processor deliver the summons. This person must be over 18 years of age. The last method already mentioned is certified mail.

Attend the trial and present your case. On the day of the trial you will be able to stand before the magistrate with your evidence and witnesses, if applicable, and present your case. The defendant will also be allowed to present their defence. When everyone has been heard, the magistrate will make a ruling. If she decides in your favour, you will be awarded a judgment. To collect on a judgment you may need to do a bank levy or garnish the wages of the defendant. The court can work you through the steps. They should have the forms you need to fill out. The court cannot collect your money judgment for you.


To collect on judgment by doing a bank levy, you will need to know where the defendant banks at. To do a wage garnishment, you will need to know where the defendant works. The time frame for the statue of limitations is different for verbal agreements and contracts.


Make sure the statue of limitations has not run out. When you have exceeded the statue of limitations, it means you cannot win your case in court if the defendant presents that as a defence. However, if the defendant is unaware of the statue of limitations and they have no other defence, the court will decide in your favour. The statue of limitations can vary from state to state and usually ranges from two years, (California), to 10 years, (Rhode Island, Louisiana).

Cite this Article A tool to create a citation to reference this article Cite this Article

About the Author

Melvin J. Richardson has been a freelance writer for two years with Associated Content, and writes about topics such as banking, credit and collections, goal setting, financial services, management, health and fitness. Richardson has worked for several banks and financial institutions and gained invaluable experience and knowledge. Richardson holds a Master of Business Administration in Executive Management from Ashland University in Ashland Ohio.