Loan money to a friend
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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
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
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Comments
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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.0 -
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.com0 -
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.0 -
Candyapple wrote: »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?
£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 advice0 -
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 Forum Ambassador and I support the Forum Team on the Budgeting & Bank Accounts, Credit Cards, Credit File & Ratings and Energy boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
If you can't be the best -
Just be better than you were yesterday.0 -
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.0 -
So she should go to the bank and get a bridging loan, that is what they exist for.£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.
Hell no. You get your solicitor to do it.I will suggest that her solicitor writes up the agreement which we will both sign.0 -
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?0
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£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
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.com0 -
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