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  • FIRST POST
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 1:21 PM
    • 96Posts
    • 4Thanks
    Hard food for midas
    Personal Loan Agreements between friends
    • #1
    • 7th Oct 13, 1:21 PM
    Personal Loan Agreements between friends 7th Oct 13 at 1:21 PM
    Dear All,

    having read one of the threads about getting a proper loan agreement in place, I have found this simple loan agreement online. I wish to use this as a template for a loan I will give. Please could you look over it and let me know that this will work ok. The money will also be traceable, from one bank account to another.

    The only niggle I have, is that if there is a default, I would wish to have the % stake in the home of this person (who would have been using that as collateral anyway. Not that I am foreseeing this happening, I am just covering my back and following the advice from people on this site who have had their fingers burned.)

    Many thanks,


    LOAN AGREEMENT
    THIS LOAN AGREEMENT (this "Agreement") dated this 8th day of October, 2013

    BETWEEN:
    XXXX

    (the "Lender")
    OF THE FIRST PART
    AND
    XXXX

    (the "Borrower")
    OF THE SECOND PART
    IN CONSIDERATION OF the Lender loaning certain monies (the "Loan") to the Borrower, and the Borrower repaying the Loan to the Lender, both parties agree to keep, perform and fulfil the promises and conditions set out in this Agreement:
    Loan Amount & Interest
    1. The Lender promises to loan £XXXX GBP to the Borrower and the Borrower promises to repay this principal amount to the Lender, at such address as may be provided in writing, with interest payable on the unpaid principal at the rate of 10 percent per annum, calculated daily but added monthly.
    Payment
    2. This Loan will be repaid in full eighteen (18) months from the execution of this Loan, however a review of this agreement will be carried out on or before the 7th April, 2014.
    Default
    3. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing and interest due under this Agreement at that time to be immediately due and payable.
    Governing Law
    4. This Agreement will be construed in accordance with and governed by the laws of Country of England.
    Costs
    5. All costs, expenses and expenditures including, without limitation, the complete legal costs incurred by enforcing this Agreement as a result of any default by the Borrower, will be added to the principal then outstanding and will immediately be paid by the Borrower.
    Binding Effect
    6. This Agreement will pass to the benefit of and be binding upon the respective heirs, executors, administrators, successors and permitted assigns of the Borrower and Lender. The Borrower waives presentment for payment, notice of non-payment, protest, and notice of protest.
    Amendments
    7. This Agreement may only be amended or modified by a written instrument executed by both the Borrower and the Lender.
    Severability
    8. The clauses and paragraphs contained in this Agreement are intended to be read and construed independently of each other. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
    General Provisions
    9. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
    Entire Agreement
    10. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise.
    IN WITNESS WHEREOF, the parties have duly affixed their signatures on this 8th day of October, 2013.
    SIGNED, SEALED AND DELIVERED
    before me, this 8th day of October, 2013

    _____________________________
    XXXX


    SIGNED, SEALED AND DELIVEREDbefore me, this 8th day of October, 2013
    XXXX
    per: ______________(SEAL)

    Copyright 2002-2013, LegalComplete.co.uk
Page 1
    • HappyMJ
    • By HappyMJ 7th Oct 13, 1:23 PM
    • 20,603 Posts
    • 17,209 Thanks
    HappyMJ
    • #2
    • 7th Oct 13, 1:23 PM
    • #2
    • 7th Oct 13, 1:23 PM
    Not worth it...don't do it. No repayment = loss of friendship.

    Why do they NEED the money? Why can't they go to a mainstream lender?

    You shouldn't charge friends interest..if you do lend them money it's interest free. If you did charge interest you would have to register as a money lender and declare the interest for tax. Too much hassle. If they wish to gift you something at the end of the agreement then it's up to them.
    Last edited by HappyMJ; 07-10-2013 at 1:25 PM.

    Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money.
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 1:32 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    • #3
    • 7th Oct 13, 1:32 PM
    I've already agreed and I want to help
    • #3
    • 7th Oct 13, 1:32 PM
    I will do this and they are happy to be paying something for the convenience of it. I know why they are borrowing it and it makes total sense. I have trusted this person for over 25 years and we have always been able to help each other out at various times.

    Normal lenders are giving them the run around.

    Thanks for letting me know about registering myself. I have no desire to be a money lender. Ideally, I would have just invested in this guy's company directly, but it's the hassle of getting the company valued and calculating a percentage stake that is a nightmare for them and me. So, this seemed like the simplest option.
    • HappyMJ
    • By HappyMJ 7th Oct 13, 1:59 PM
    • 20,603 Posts
    • 17,209 Thanks
    HappyMJ
    • #4
    • 7th Oct 13, 1:59 PM
    • #4
    • 7th Oct 13, 1:59 PM
    I will do this and they are happy to be paying something for the convenience of it. I know why they are borrowing it and it makes total sense. I have trusted this person for over 25 years and we have always been able to help each other out at various times.

    Normal lenders are giving them the run around.

    Thanks for letting me know about registering myself. I have no desire to be a money lender. Ideally, I would have just invested in this guy's company directly, but it's the hassle of getting the company valued and calculating a percentage stake that is a nightmare for them and me. So, this seemed like the simplest option.
    Originally posted by Hard food for midas
    Ok..... your agreement is not valid as you are calling yourself a lender when you aren't. Lending money and expecting payment with interest is acting as a loan shark, is illegal and your agreement will be completely ignored if you had to take your friend to court. Rewrite the agreement as an agreement between friends....without any interest. As I said earlier if they wish to reward you at the end by gifting you something in addition to the original amount you lent them then that's up to them....and you have no HMRC reporting requirements.

    You could get around the Office of Fair Trading (OFT) registering requirements by the both of you registering on ZOPA...you as a lender (technically an investor) and your friend as a borrower. They have the licenses from the OFT to do what they do and help you resolve your friends problem. Also, if your friend becomes sick or dies and can't pay then ZOPA can pay you anyway as there is an optional insurance product covering non payment.

    Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money.
    • FireWyrm
    • By FireWyrm 7th Oct 13, 2:16 PM
    • 6,415 Posts
    • 12,130 Thanks
    FireWyrm
    • #5
    • 7th Oct 13, 2:16 PM
    • #5
    • 7th Oct 13, 2:16 PM
    I will do this and they are happy to be paying something for the convenience of it. I know why they are borrowing it and it makes total sense. I have trusted this person for over 25 years and we have always been able to help each other out at various times.

    Normal lenders are giving them the run around.

    Thanks for letting me know about registering myself. I have no desire to be a money lender. Ideally, I would have just invested in this guy's company directly, but it's the hassle of getting the company valued and calculating a percentage stake that is a nightmare for them and me. So, this seemed like the simplest option.
    Originally posted by Hard food for midas
    No agreement you write down will be worth the paper it's printed on in reality. You may be able to sue them eventually through the court and you might even win, but extracting the money is another matter entirely.

    Never lend money to friends unless you can afford to lose it. If you cant afford to lose it, dont lend it - it's as simple as that. I've lent money to 'friends' I've known for nearly 30 years and I'm still waiting for it to come back - it never will. Almost every one you ask will tell you exactly the same story, once lent, it is lost. I've almost never heard of an exception to that rule. We all make the mistake of thinking it will be different for us and our particular friends, but I've never heard of this working out...ever.
    Debt Free! Long road, but we did it
    Meet my best friend : YNAB (you need a budget)
    My other best friend is a filofax.
    Do or do not, there is no try....Yoda.

    [/COLOR]
  • Apples2
    • #6
    • 7th Oct 13, 2:18 PM
    • #6
    • 7th Oct 13, 2:18 PM
    Normal lenders are giving them the run around.
    Originally posted by Hard food for midas
    That'll be because normal lenders have a long history of lending so know the things to look for which prevents them being turned over.

    It is seldom a good idea to mix friendship with business.

    Lets face it, if the repayments to you stop for whatever reason, you will become reliant upon your agreement letter to enforce payment.
    If the repayments stop, it is likely they can no longer afford to repay you, so what good is the letter going to be?

    Would you really try to force your good friends of 25 years to sell their house so you can get your money back?

    There is no room for compassion in business, ask all the Payday defaulters who lost their jobs in the three weeks between borrowing and repaying.
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 2:53 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    • #7
    • 7th Oct 13, 2:53 PM
    • #7
    • 7th Oct 13, 2:53 PM
    Ok..... your agreement is not valid as you are calling yourself a lender when you aren't. Lending money and expecting payment with interest is acting as a loan shark, is illegal and your agreement will be completely ignored if you had to take your friend to court. Rewrite the agreement as an agreement between friends....without any interest. As I said earlier if they wish to reward you at the end by gifting you something in addition to the original amount you lent them then that's up to them....and you have no HMRC reporting requirements.
    Originally posted by HappyMJ
    This seems to be the best option, thanks.

    I called Zopa and it won't work that way. I'm not wanting to direct my money at a whole load of businesses over years...but thanks too.
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 2:56 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    • #8
    • 7th Oct 13, 2:56 PM
    • #8
    • 7th Oct 13, 2:56 PM
    acting as a loan shark
    Originally posted by HappyMJ
    Hardly, a loan shark. I'm offering very favourable T&Cs with degree of flexibility suitable to borrower at favourable rate that no bank would ever consider lending...

    they're happy. Loan sharks make us all unhappy.
    • dealer wins
    • By dealer wins 7th Oct 13, 2:57 PM
    • 5,594 Posts
    • 10,512 Thanks
    dealer wins
    • #9
    • 7th Oct 13, 2:57 PM
    • #9
    • 7th Oct 13, 2:57 PM
    Dont do it.

    Even though you have taken more time and care than most who lend friends money, the only benefit you will have if they dont pay you back is a piece of paper with an X friends signature on it to remind you of that fateful decision!!


    Have a read of this thread for many horror stories of family members, lifelong friends etc ripping their relationships and families apart!!

    http://forums.moneysavingexpert.com/showthread.php?t=76953
    All replies are super fluffy and nice, and newbies are so lovely and welcome. PPR never again!
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 2:59 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    Dont do it.

    Even though you have taken more time and care than most who lend friends money, the only benefit you will have if they dont pay you back is a piece of paper with an X friends signature on it to remind you of that fateful decision!!


    Have a read of this thread for many horror stories of family members, lifelong friends etc ripping their relationships and families apart!!

    http://forums.moneysavingexpert.com/showthread.php?t=76953
    Originally posted by dealer wins
    Thank you. That was the thread I was referring to when I said I'd looked into it...
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 3:10 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    That'll be because normal lenders have a long history of lending so know the things to look for which prevents them being turned over.

    It is seldom a good idea to mix friendship with business.

    Lets face it, if the repayments to you stop for whatever reason, you will become reliant upon your agreement letter to enforce payment.
    If the repayments stop, it is likely they can no longer afford to repay you, so what good is the letter going to be?

    Would you really try to force your good friends of 25 years to sell their house so you can get your money back?

    There is no room for compassion in business, ask all the Payday defaulters who lost their jobs in the three weeks between borrowing and repaying.
    Originally posted by Apples2
    Normal lenders can be a bit slow on the uptake and not dynamic enough for small/medium size businesses - look at all the headlines - money from banks is not getting through to our businesses. Where it is, it trickles, crippling our economy.
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 3:15 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    Ok. How about this: Agreement Between Friends?



    AGREEMENT BETWEEN FRIENDS
    THIS AGREEMENT dated this 8th day of October, 2013

    BETWEEN:
    XXXX

    (the "lender")
    OF THE FIRST PART
    AND
    XXXX

    (the "Borrower")
    OF THE SECOND PART
    IN CONSIDERATION OF the Lender loaning certain monies (the "Loan") to the Borrower, and the Borrower repaying the Loan to the Lender, both parties agree to keep, perform and fulfil the promises and conditions set out in this Agreement:
    Loan Amount
    1. The Lender promises to loan £XXXX GBP to the Borrower and the Borrower promises to repay this principal amount to the Lender, at such address as may be provided in writing.
    2. Payment
    2. This Loan will be repaid in full eighteen (18) months from the execution of this Loan, however a review of this agreement will be carried out on or before the 7th April, 2014.
    Default
    3. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing under this Agreement at that time to be immediately due and payable.
    Governing Law
    4. This Agreement will be construed in accordance with and governed by the laws of Country of England.
    Costs
    5. All costs, expenses and expenditures including, without limitation, the complete legal costs incurred by enforcing this Agreement as a result of any default by the Borrower, will be added to the principal then outstanding and will immediately be paid by the Borrower.
    Binding Effect
    6. This Agreement will pass to the benefit of and be binding upon the respective heirs, executors, administrators, successors and permitted assigns of the Borrower and Lender. The Borrower waives presentment for payment, notice of non-payment, protest, and notice of protest.
    Amendments
    7. This Agreement may only be amended or modified by a written instrument executed by both the Borrower and the Lender.
    Severability
    8. The clauses and paragraphs contained in this Agreement are intended to be read and construed independently of each other. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
    General Provisions
    9. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
    Entire Agreement
    10. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise.
    IN WITNESS WHEREOF, the parties have duly affixed their signatures on this 8th day of October, 2013.
    SIGNED, SEALED AND DELIVERED
    before me, this 8th day of October, 2013

    _____________________________
    XXXX


    SIGNED, SEALED AND DELIVEREDbefore me, this 8th day of October, 2013
    XXXX
    per: ______________(SEAL)

    Copyright 2002-2013, LegalComplete.co.uk
    • bargainbetty
    • By bargainbetty 7th Oct 13, 3:41 PM
    • 3,084 Posts
    • 7,111 Thanks
    bargainbetty
    You're missing the point. Sign what you like with them, if they don't have the money, you won't get the money without a long and protracted legal battle. You would have to get a court order to put a claim onto their home, and it would be behind any mortgage debt, so forget that too. I say that because if they cannot obtain the finance they need by remortgaging their property, their personal debts are already such that there would be nothing left for you. If they tell you that isn't the problem, ask them why they aren't doing it themselves?

    If they cannot get funding, there is a reason. Have you performed a proper review of the business? Seen the order book, looked at cashflow and projected revenues? If you can see a viable business, then so can a formal lender. Banks are lending, but viable business plans and investment are necessary.

    I have a friend I've known for 30 years. She just came back from five weeks touring Europe with her family. Lots of stories about vineyards and fine cheese, and racks of smoked sausages etc. She has owed me hundreds for years now. I'll never see it, and I'll never lend her another penny.

    Good luck
    Some days, it's just not worth chewing through the leather straps....
    LB moment - March 2006. DFD - 1 June 2012!!! DEBT FREE!
    MFW - Joined May 2012, aiming to cut the mortgage by an extra two months every year. (Overpaid £3000 so far)
    , only 11 years to go.

    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 3:56 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    You're missing the point. Sign what you like with them, if they don't have the money, you won't get the money without a long and protracted legal battle. You would have to get a court order to put a claim onto their home, and it would be behind any mortgage debt, so forget that too. I say that because if they cannot obtain the finance they need by remortgaging their property, their personal debts are already such that there would be nothing left for you. If they tell you that isn't the problem, ask them why they aren't doing it themselves?

    If they cannot get funding, there is a reason. Have you performed a proper review of the business? Seen the order book, looked at cashflow and projected revenues? If you can see a viable business, then so can a formal lender. Banks are lending, but viable business plans and investment are necessary.

    I have a friend I've known for 30 years. She just came back from five weeks touring Europe with her family. Lots of stories about vineyards and fine cheese, and racks of smoked sausages etc. She has owed me hundreds for years now. I'll never see it, and I'll never lend her another penny.

    Good luck
    Originally posted by bargainbetty
    I genuinely thank everyone for their concern in the worst case scenario. I have absolutely no doubt that the loan will be repaid. This is not a typical situation and I am 99% sure I will not be back on this site in a year's time, crying help!

    To be honest, in the past, we have leant each other money back and forth with verbal agreements and no problems (maybe I should have said this at the beginning) I just got shaken by the nightmares I read about on the other thread and as this is a large sum for me, I wanted to try and follow advice given on the other thread to give me extra peace of mind.
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 3:58 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    No agreement you write down will be worth the paper it's printed on in reality. You may be able to sue them eventually through the court and you might even win, but extracting the money is another matter entirely.

    Never lend money to friends unless you can afford to lose it. If you cant afford to lose it, dont lend it - it's as simple as that. I've lent money to 'friends' I've known for nearly 30 years and I'm still waiting for it to come back - it never will. Almost every one you ask will tell you exactly the same story, once lent, it is lost. I've almost never heard of an exception to that rule. We all make the mistake of thinking it will be different for us and our particular friends, but I've never heard of this working out...ever.
    Originally posted by FireWyrm
    People told us never to buy a house together, but we did it many years ago and made a very handsome profit, so it's not always bad...
  • John1993
    This seems to be the best option, thanks.
    Originally posted by Hard food for midas
    I'd agree with others that the best option is to not do this. I've lent a few times to friends/fami ly in recent years, and without fail it has wrecked a previously good relationship.

    The last one was only a few hundred pounds, but it turned out that the cousin to whom I'd lent it had not been completely honest about what it was for, had relied on someone paying him back to be able to meet his "cast iron" promises to me, and so ended up paying very late. I am furious with him for having lied to me to get money, and he seems more than a bit unhapppy with me for having dared to want it all paid back when I'm far richer than he is.

    Never again.
  • John1993
    I genuinely thank everyone for their concern in the worst case scenario. I have absolutely no doubt that the loan will be repaid.
    Originally posted by Hard food for midas
    Then you are acting as a fool. There is no certainty in life, so you are not even going in to this with your eyes open.

    You clearly have no interest in taking advice on board, however, so I'll step out of this thread, in despair.
    • StuC75
    • By StuC75 7th Oct 13, 4:16 PM
    • 2,032 Posts
    • 1,151 Thanks
    StuC75
    At least in your case the investment had some form of security - the house - that you sell on should it have gone wrong.. Here it is investing in a company - what is being put up as security..

    The OP would be best placed to have some kind of agreement drawn up making him a shareholder in the company..

    As it stands such an agreement would fall so far down the list of what could be claimed - even if were to push for some form of charge on the property.. (behind bank & other lenders by the sound of it)..

    In short OP only be prepared to make the investment if you are happy to never see it again; that way whatever you do get back will always be a bonus..

    People told us never to buy a house together, but we did it many years ago and made a very handsome profit, so it's not always bad...
    Originally posted by Hard food for midas
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 4:20 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    Then you are acting as a fool. There is no certainty in life, so you are not even going in to this with your eyes open.

    You clearly have no interest in taking advice on board, however, so I'll step out of this thread, in despair.
    Originally posted by John1993
    John, I think that is a bit unfair. Clearly, I am taking peoples' advice - that is why I have switched it to an 'agreement between friends.'

    It has also been good to hear everyone else's issues with lending & no doubt this is why Shakespeare said over 500 years ago: 'never a lender nor a borrower be.' I have however, my whole life been a lender and a borrower. Maybe I have been lucky. No-one has yet defaulted and I have never been unable to repay someone.

    I think forewarned is forearmed, but there is no need to despair...
    • Hard food for midas
    • By Hard food for midas 7th Oct 13, 4:24 PM
    • 96 Posts
    • 4 Thanks
    Hard food for midas
    At least in your case the investment had some form of security - the house - that you sell on should it have gone wrong.. Here it is investing in a company - what is being put up as security..

    The OP would be best placed to have some kind of agreement drawn up making him a shareholder in the company..

    As it stands such an agreement would fall so far down the list of what could be claimed - even if were to push for some form of charge on the property.. (behind bank & other lenders by the sound of it)..

    In short OP only be prepared to make the investment if you are happy to never see it again; that way whatever you do get back will always be a bonus..
    Originally posted by StuC75
    Yes, fair enough StuC75. We were going to try and value the business and I'd've had a stake in it - it's a great little cottage business - but it's just attained another concession in another large chain of stores - they need cash to expand. Bank has turned them down once but are reviewing again next week. I think the bank are being way too cautious....they do not see the potential I see..
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