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Suppose I want to give someone a loan of $10,000, to be returned in a year. Naturally I would ask him to give me a single postponed cheque of $10,000 for a year. But I thought of a second option: ask for 10 posponed cheques of $1,000 each, all for the same date. The reasons are:

  • Maybe in a year his account contains less than $10,000 but more than $1,000. If I deposit a single large cheque, the cheque bounces and I get nothing (unless I go to collection, which I would rather avoid). But if I deposit several small cheques, there is a higher chance that at least some of them are respected and I get some money back.
  • A single bounced cheque makes a single bad mark on the debtor's credit report, while 10 cheques make 10 bad marks. Assuming the debtor cares about his credit score, this may give him more incentive to pay in time. I am not sure about it, since I do not know how credit scores work.

Does this make any sense?

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You are assuming that you will be able to "sneak up" on the debtor with the cheques, and thus maybe collect something. What you are missing is that if they decide to not repay you, they can simply cancel the post-dated cheques. And as importantly:

unless I go to collection, which I would rather avoid

Then don't loan money out, give someone a gift and be nicely surprised if you ever see anything of it back, or be ready to go and collect the money owed.

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