Hypothetical - lending money to someone in debt

grimsalve

Just wondering what the risks, pitfalls, problems, etc. there are with doing something like this (apart from the obvious one!)

Lend someone some cash to get them out of debt then agree a pay back period and interest rate which would be much less than the interest rate they'd pay to a bank or credit card or finance company.

Biggest concern would be the lendee just walking off with the cash or refusing to pay it back so I'm guessing it would require something in writing? and the cost of this might negate any benefits from doing it in the first place?

Would there be any tax implications for the lender from doing this?

birkee

Don't you need a licence to lend money on an official basis?

My advice, don't lend anyone more than a few quid, and be prepared to not get it back. If they have a bill to pay, or you to recieve money back, you will lose out.

SpeedyGonzalis

It depends on the situation. Lending a close friend or partner £200 to get them out of a sticky situation is very different to handing over £10K to a compulsive spender with credit card debt coming out of their ears!

birkee

SpeedyGonzalis wrote: »

It depends on the situation. Lending a close friend or partner £200 to get them out of a sticky situation is very different to handing over £10K to a compulsive spender with credit card debt coming out of their ears!

Yes, you can lend money to who you like, but...the OP was asking about using paperwork to form an agreement for the lender to pay back the money.
My GUESS is, that not only would you need a licence, but may have to register as a money lender too.

I DO stand to be corrected though, but was giving the OP a cautionary 'be aware of what you are doing' warning.

grimsalve

birkee wrote: »

Yes, you can lend money to who you like, but...the OP was asking about using paperwork to form an agreement for the lender to pay back the money.
My GUESS is, that not only would you need a licence, but may have to register as a money lender too.

I DO stand to be corrected though, but was giving the OP a cautionary 'be aware of what you are doing' warning.

On second thoughts I think I'll steer clear - I was wondering about a sort of "semi-official" lending (having a signed document or something like that to protect both parties but avoiding any legal/tax implications) but the more I think about it, the more I'm thinking that there's probably a much higher risk in doing something like this than just putting the lot on a horse in the 2.30 at Chepstow.

Only a hypothetical question anyway.

killerpeaty

Hi there grim, I wouldn't go for it, there's a very fine line between legal and illegal in this area.