A loan is a cash advance from a lender that the borrower must repay, with or without
interest. For a bona fide loan to exist, the lender and the borrower must acknowledge
the obligation to repay. When money or property is given and accepted based on any
understanding other than it is to be repaid by the receiver, there is no loan for
A statement by the individual that they feel personally responsible to pay back the
friend or relative on its own does not create a legal obligation to repay the individual
who provided the cash. Similarly, the lender’s statement that the borrower must only
repay the cash if they become financially able to do so does not, on its own, create
a legal obligation to repay.
EXAMPLE: Mr. Johnson applies for SSI in June 2011. He has no income and alleges that his son
provided him $200 cash per month as a loan. Mr. Johnson states that he would like
to use his SSI benefits if approved to pay back the loan. When contacted, the son
states that although he would like his father to repay him, he does not have to repay him. The CR determines that a bona fide loan does not exist because there is no obligation
NOTE: The obligation to repay cannot be contingent on future income that might be paid. There must be an understanding that the borrower
must pay it back for it to be a bona fide loan.