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    • gazgits
    • By gazgits 8th Nov 17, 12:15 PM
    • 44Posts
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    gazgits
    Loan money to a friend
    • #1
    • 8th Nov 17, 12:15 PM
    Loan money to a friend 8th Nov 17 at 12:15 PM
    A family friend has asked me to loan her some money to help her with a house move. She has requested £50000 which she will pay back on the sale of her own property.


    Can anyone please give me the best advice on safeguarding my money if anything should happen to her.
    For example if she suddenly decide not to pay me the money back or if she was to pass away. Whilst I don't expect any of these issues to occur I believe it is better to be safe than sorry.


    I intend to get a written letter signed by both of use as proof of the loan and I will also be paying it direct into her bank account also as proof.


    Any other advice would be greatly appreciated.


    Thank you
Page 1
    • zx81
    • By zx81 8th Nov 17, 12:22 PM
    • 14,043 Posts
    • 14,729 Thanks
    zx81
    • #2
    • 8th Nov 17, 12:22 PM
    • #2
    • 8th Nov 17, 12:22 PM
    A letter or loan agreement would be a start, but you would be looking at taking small claims action against her if she decided not to pay.

    That wouldn't help if she didn't have the money to repay you.

    I would either politely decline, or think of it as a gift when you hand it over, and treat any repayment as an unexpected bonus.
    • Candyapple
    • By Candyapple 8th Nov 17, 12:29 PM
    • 2,472 Posts
    • 1,848 Thanks
    Candyapple
    • #3
    • 8th Nov 17, 12:29 PM
    • #3
    • 8th Nov 17, 12:29 PM
    When you say 'help with a house move' do you mean to help her buy her next home, or help with moving costs such as removal of goods etc?

    If it's to buy her next home, I would have thought that the solicitors would request a letter from you stating that you are gifting her the money, the same way as if a parent(s) were providing deposit money for their children.

    Why £50k? Or did you mean £5k?

    Why can't she sell up first, and then proceed with the new house purchase? What's the urgency?
    I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com
    • Tarambor
    • By Tarambor 8th Nov 17, 12:31 PM
    • 1,530 Posts
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    Tarambor
    • #4
    • 8th Nov 17, 12:31 PM
    • #4
    • 8th Nov 17, 12:31 PM
    As zx81 says, you need to treat it as a gift as a loan to a family member or friends is usually not recoverable however that isn't to say that is always the case.

    What you need to do is to draft a proper agreement, a written letter is not sufficient. This agreement needs to have specific items in it in order to be classed as enforceable but keep it simple and do not rely on templates off the internet as there is at least one time when someone used a template on Judge Rinder to be told one of the clauses that were in said template basically meant there was no end date.

    The agreement needs the names of both parties and the date the agreement was drawn up and signed. It needs to state that the purpose of the money is for a loan and it needs to state what the purpose of the loan is for, i,e "£50,000 loan for the purposes of buying a house", what the repayment terms are, the duration of the loan when it is to be paid by, what the total amount is to be repaid including any interest to be paid and also stating how much that interest is.

    I would not have "to be repaid upon the sale of her property" as the repayment terms/duration of the loan as that is an open ended date and if you put that then you would never be able to recover your money if she didn't sell it. Instead put down "upon sale of the property or <insert date 12/24 months down the line>, whichever is reached first." and then you're putting an end date on it so it can't go on for years and years. Make sure she reads it and fully understands it. Get both parties to sign it and also get it witnessed by a third party. That way if it goes to court there is no disputing that the money was given to your friend for the sole purpose of a loan for the purposes stated with a fixed end date to be repaid.
    Last edited by Tarambor; 08-11-2017 at 12:39 PM.
    • gazgits
    • By gazgits 8th Nov 17, 12:38 PM
    • 44 Posts
    • 1 Thanks
    gazgits
    • #5
    • 8th Nov 17, 12:38 PM
    • #5
    • 8th Nov 17, 12:38 PM
    When you say 'help with a house move' do you mean to help her buy her next home, or help with moving costs such as removal of goods etc?

    If it's to buy her next home, I would have thought that the solicitors would request a letter from you stating that you are gifting her the money, the same way as if a parent(s) were providing deposit money for their children.

    Why £50k? Or did you mean £5k?

    Why can't she sell up first, and then proceed with the new house purchase? What's the urgency?
    Originally posted by Candyapple

    £50k is what she has asked for. She has found her "perfect retirement flat" which she doesn't want to miss out on by waiting for her house to sell.


    I will suggest that her solicitor writes up the agreement which we will both sign.


    Thanks all for your advice
    • Dobbibill
    • By Dobbibill 8th Nov 17, 12:42 PM
    • 2,448 Posts
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    Dobbibill
    • #6
    • 8th Nov 17, 12:42 PM
    • #6
    • 8th Nov 17, 12:42 PM
    Don't do it.

    Search 'loaned money to a friend' and find the many many horror stories.

    If your friend wants that much money, there are professional lenders they can approach...like a bank.
    I'm a Board Guide on the Energy, Student Money Saving, UK Armed Forces and
    Local Money Saving - Wales boards. I'm a volunteer to help the boards run smoothly, and I can move and merge posts there.
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.


    A person who never made a mistake, never tried anything new.
    • Caroline_a
    • By Caroline_a 8th Nov 17, 12:43 PM
    • 3,873 Posts
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    Caroline_a
    • #7
    • 8th Nov 17, 12:43 PM
    • #7
    • 8th Nov 17, 12:43 PM
    I think that everybody with very few exceptions on this forum would say don't. The forum is littered with people who have unpaid loans from friends and family. You need to know things like how much is her house worth? Will she have £50k left over after all moving costs?

    Personally I wouldn't do it.
    • Tarambor
    • By Tarambor 8th Nov 17, 12:43 PM
    • 1,530 Posts
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    Tarambor
    • #8
    • 8th Nov 17, 12:43 PM
    • #8
    • 8th Nov 17, 12:43 PM
    £50k is what she has asked for. She has found her "perfect retirement flat" which she doesn't want to miss out on by waiting for her house to sell.
    Originally posted by gazgits
    So she should go to the bank and get a bridging loan, that is what they exist for.
    I will suggest that her solicitor writes up the agreement which we will both sign.
    Hell no. You get your solicitor to do it.
    • verityboo
    • By verityboo 8th Nov 17, 12:47 PM
    • 888 Posts
    • 1,108 Thanks
    verityboo
    • #9
    • 8th Nov 17, 12:47 PM
    • #9
    • 8th Nov 17, 12:47 PM
    Could the flat be jointly purchased so you own your share of the flat. The friend could then buy out your share at a later date?
    • Candyapple
    • By Candyapple 8th Nov 17, 12:47 PM
    • 2,472 Posts
    • 1,848 Thanks
    Candyapple
    £50k is what she has asked for. She has found her "perfect retirement flat" which she doesn't want to miss out on by waiting for her house to sell.


    I will suggest that her solicitor writes up the agreement which we will both sign.


    Thanks all for your advice
    Originally posted by gazgits

    Don't do it. It's a really bad plan. What happens if the reason she doesn't want to miss out is because she knows her property won't get the price she thinks it is worth? Property prices are falling everywhere.

    Given that if she priced her current house to sell, it will sell.

    Is the new property a new build? If not, why are the vendors in such a rush to sell?
    I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com
    • purdyoaten2
    • By purdyoaten2 8th Nov 17, 2:18 PM
    • 709 Posts
    • 315 Thanks
    purdyoaten2
    Could the flat be jointly purchased so you own your share of the flat. The friend could then buy out your share at a later date?
    Originally posted by verityboo
    Totally agree - buy jointly. Otherwise proceed on the basis that you could be £50000 plus one friend worse off at some time in the future!
    purdyoaten lost his password
    • gingerdad
    • By gingerdad 8th Nov 17, 4:16 PM
    • 1,778 Posts
    • 1,286 Thanks
    gingerdad
    best and only advice is don't do it.

    or do it and don't expect it back

    it will most likely go wrong
    The futures bright the future is Ginger
    • poppasmurf_bewdley
    • By poppasmurf_bewdley 8th Nov 17, 4:28 PM
    • 5,035 Posts
    • 5,188 Thanks
    poppasmurf_bewdley
    The only way I would make the loan was if I had a charge of her present house, meaning I would be paid when the house was sold, no matter if the friend agrees or not.

    Having said that, I wouldn't do it anyway. £50k is an awful lot of money.

    Have you checked her credit file? My bet is it's not very good or she would be asking a bank, not you.
    "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery." Mr Wilkins Micawber in David Copperfield by Charles Dickens.
    • ReadingTim
    • By ReadingTim 8th Nov 17, 5:05 PM
    • 2,147 Posts
    • 3,048 Thanks
    ReadingTim
    Short of a legal charge on her current property, there's no way to guarantee you'll get your money back. So, if you can't afford to lose it, you can't afford to lend it.

    But in short, don't. Just don't.
    • societys child
    • By societys child 8th Nov 17, 5:17 PM
    • 4,795 Posts
    • 5,210 Thanks
    societys child
    To be honest, I think your friend is pushing your friendship to the limit, and putting you in a very awkward position.

    Ask yourself, would a true friend do that?

    I'd say no (unless you can afford to give £50k away)
    Lending to friends or relations almost always ends in tears.

    • Missus Hyde
    • By Missus Hyde 8th Nov 17, 5:49 PM
    • 301 Posts
    • 424 Thanks
    Missus Hyde
    Don't do it. It's a really bad plan. What happens if the reason she doesn't want to miss out is because she knows her property won't get the price she thinks it is worth? Property prices are falling everywhere.

    Given that if she priced her current house to sell, it will sell.

    Is the new property a new build? If not, why are the vendors in such a rush to sell?
    Originally posted by Candyapple
    best and only advice is don't do it.

    or do it and don't expect it back

    it will most likely go wrong
    Originally posted by gingerdad
    Short of a legal charge on her current property, there's no way to guarantee you'll get your money back. So, if you can't afford to lose it, you can't afford to lend it.

    But in short, don't. Just don't.
    Originally posted by ReadingTim
    Another vote for don’t do it!!

    These Forums are littered with the debris of broken friendships, where one party has faithfully promised to pay back the other party and sadly in most cases it never happened.

    Even with water tight agreements, it’s very difficult to actually get payment of the loan from a “friend”. You’d be better off just giving her the money (always supposing you can afford to part with 50000 grand! )

    Suggest your friend goes to a bank (there must be some reason that she hasn’t approached the bank in the first place.)
    It's a far, far better thing that I do, than I have ever done; it is a far, far better rest that I go to, than I have ever known........Sydney Carton.
    • gazgits
    • By gazgits 8th Nov 17, 7:05 PM
    • 44 Posts
    • 1 Thanks
    gazgits
    Thanks for all your comments. You have certainly given me plenty to think about.
    • badmemory
    • By badmemory 8th Nov 17, 7:37 PM
    • 938 Posts
    • 970 Thanks
    badmemory
    There are 3 possible outcomes to this, one is that you go ahead & will lose a friend & your money or you say no & may lose a friend but won't lose your money or you lend the money get it bank & keep the friend but that is an awful lot of money.

    Of course, if you have a few mill in the bank then why not, but I suspect you are like most of us who have accumulated some savings & would not want to be stuck in the future without them.
    • DCFC79
    • By DCFC79 8th Nov 17, 8:52 PM
    • 30,265 Posts
    • 19,144 Thanks
    DCFC79
    I wouldn't do it, its a big chunk of money involved if it went pear shaped.
    Can people stop loaning money/being a guarator to family/friends, it rarely ends well and you lose out as your money is gone or you get shafted with being a guarantor.
    • dresdendave
    • By dresdendave 8th Nov 17, 9:44 PM
    • 657 Posts
    • 766 Thanks
    dresdendave
    You’d be better off just giving her the money (always supposing you can afford to part with 50000 grand! )
    Originally posted by Missus Hyde


    Even the likes of Abramovich might think twice about lending a friend £50million.
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