Loaning £20K.

opinions4u

mollycat wrote: »

A friend of mine is buying a house but is a little short regarding her deposit.

I am keen to help out by lending her £20K

Madness. Recipe for disaster. Likelihood is she won't be your friend for much longer.

1. Can I just write her a cheque for £20K?

Yes.

2. If she writes me a cheque for £1250 each month, do I need to declare this for tax purposes?

You need to declare the interest for tax purposes. If you are mad enough to go ahead with this, I'd suggest that the first £20k repaid is treated as (and documented as) return of capitlal. The final £2,250 will then be subject to income tax at your highest rate for the tax year in which it's paid.

If you declare £125 a month as intrest (and pay tax on it) and then she forgets to repay the rest you've lost out twice - once on captial and once on tax.

mollycat

Hi all.

Thanks for the concern, it's appreciated.:)

Is anyoneable to answer the questions I asked please?

Thanks.

Edit. Sorry opinions4u, we must have crossed posted.

JuicyJesus

I think opinions4u did.

I however have my own concerns, in that the scheme as proposed is bugf*ck crazy.

You will have very little comeback should she simply run away with the money, which tends to be how such things ultimately end. And if she doesn't have £20,000 now then where is she going to find that plus £2,500 extra in 18 months time? That's £1250 a month minimum, JUST to repay you - does she earn that kind of money? If she does, why does she need to borrow £20k from you?

I file this in the same "stupid idea" folder as things like being a guarantor for someone else's loan and taking out credit in your name for someone else's use. It is an utterly bonkers thing to do and you should run like hell.

talana

You can loan her whatever you want, but I can only repeat what I said above:

The mortgage lender will want to know the source of the deposit too.
It has to be the buyer's own cash, not a loan.

The mortgage provider will not accept it as a deposit, so you'll have wasted your time.

MrsTinks

talana wrote: »

You can loan her whatever you want, but I can only repeat what I said above:


The mortgage provider will not accept it as a deposit, so you'll have wasted your time.

Unless she has no intention of telling them that the money isn't hers or a gift etc... which opens a whole world of problems...

OP - you are not licenced to lend money! Therefor your comeback on her should she NOT repay you is really really weak if not non-existent...

Please don't do this! If you can afford to loose £20k then by all means go ahead, but ONLY ever lend money you can afford to loose. If something happened to her like goodness forbid she was hit by a car and died... do you REALLY think you would have any claim on her estate once her house was sold (assuming there was any money left!)...

elantan

i loaned a *friend* money once ... no where near as much as you are thinking of loaning ... it was a nightmare trying to get it back ... we barely talk now ... although a year after she finally paid me the money she owed me she did ask to borrow the same amount again ... i did laugh in her face at that point ... she was going to loose her house both times ... i wouldnt lent to anyone again lesson learned on my part

LovelyLeeds

mollycat wrote: »

Looking for some advice.

Please DON'T DO IT. Unless you can afford to gift/give her £20K, the prospect of you getting this back under the terms you state are agreed - are zero.

dealer_wins

Some people need to learn the hard way. Like losing 20 big ones!!

somethingcorporate

Read the lending money to F&F thread first. Please.

Then don't do it.

How many people does it take to tell you this is a bad idea before you actually listen to them? You'll have no comeback when your "friend" cannot repay and you'll be down £20k and a friend. Just be honest and upfront and tell them you don't have the money. I am sure they will understand.

mollycat

dealer_wins wrote: »

Some people need to learn the hard way. Like losing 20 big ones!!

No need to be unpleasant mate