Loaning £20K.

Flat_Eric

mollycat wrote: »

Hi all. Hope this is on the right board.

Looking for some advice.

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, she intends to pay me back £22.5K over the next 18 months, a scenario that suits her both.

What i am unsure of is the implications for this;

1. Can I just write her a cheque for £20K?
2. If she writes me a cheque for £1250 each month, do I need to declare this for tax purposes?

Many thanks in advance.:)

In answer to your questions: -

1. Yes - I don't see any reason why not ?
2. Don't know - other posters have replied to this/would suggest you speak to an accountant?

My immediate reaction is not to lend the money but can I ask.... Are you just intending to just hand the money over ? / what are you intending to do to record the loan ?

poppasmurf_bewdley

mollycat wrote: »

No need to be unpleasant mate

I don't think he's being unpleasant.

More a comment that this particular thread does seem to indicate that you are determined to go ahead with this foolish plan no matter how many people give you advice to the contrary.

Nobody wants to see you lose £20k but you are going the right way to do so and will have nobody to blame but yourself.

Methinks in 12 months time, you will be coming back to this Forum asking how to get back the money you've loaned.

Debt_Robot

@mollycat, while I think it's great you care about your friend, how about encouraging her to save her own money to she can get the £20K to get her deposit?

She obviously cannot afford the house which means from a cash viewpoint, she cannot afford to have the mortgage. £20K is a lot of money - are you prepared to lose it?

I would not gamble with savings and I think the other posters here only want to *protect* you from the inevitable pain. What if she loses her job? What if, God forbid, she passes away? Can you seriously afford not to have that money?

If all those answers are yes, you know what to do.

Good luck!

paddyrg

£1250 a month is a lot of money for her to repay - if she is having to borrow to get the deposit together, I suspect she is mortgaging to the hilt, so finding an extra £1250/month on top of the mortgage repayments is tough - unless she has a pay rise of approx £25k+ (as anyone with a £25k pay RISE will likely be on 40% tax) and is giving it ALL to you for 18 months, she can't afford to buy this house, and you cannot afford to get caught up in her dramas. I would be anxious that she just isn't that financially savvy, and doesn't realise how much extra borrowing it is

Please use any excuse you can think of, or legally BUY a slice of her house and have her buy shares back off you, or have a legal charge applied to the property (although the lenders will not lend on that basis). Otherwise you will be the first party to be defaulted on as you don't hold a legal lein on the property, and as such it will be you who loses out.

Or - just treat it as a gift. If you can't afford to give it as a gift, you can't afford to lend it. No matter how strong the friendship now, loans will drive a wedge between you.

barbarawright

If the friend can pay back £20,000 in 18 months why can't she she save for another 18 months. Does she think house-prices are going to go up?

I am struggling to understand the concept of someone with a 'spare' £1200 a month.

Apples2

paddyrg wrote: »

I would be anxious that she just isn't that financially savvy, and doesn't realise how much extra borrowing it is
.

Or she is exceptionally clever and already knows the OP is not savvy enough to understand this money does not have to be repaid.

Sounds like lunacy....

mollycat

poppasmurf_bewdley wrote: »

Methinks in 12 months time, you will be coming back to this Forum asking how to get back the money you've loaned.

Erm.....no, I wont!

mollycat

Flat_Eric wrote: »

In answer to your questions: -

1. Yes - I don't see any reason why not ?
2. Don't know - other posters have replied to this/would suggest you speak to an accountant?

My immediate reaction is not to lend the money but can I ask.... Are you just intending to just hand the money over ? / what are you intending to do to record the loan ?

Thanks for your reply Flat Eric.

In response to your query; sorry, other than the information in the OP im not prepared to discuss the arrangement.

I have researched what paperwork i need to set up though.

Thanks.

LovelyLeeds

mollycat wrote: »

In response to your query; sorry, other than the information in the OP im not prepared to discuss the arrangement.

You've come on a public message board asking for advice, you've been given it. Another poster then asked a perfectly valid question to which you wont answer!
There's clearly a lot more to this - and as you're being choosey with what you divulge then posters will not be able to understand your lunatic and suicidal intention of lending a friend £20K.

In answer to your questions, the best thing is to ring the tax office they should be able to let you know the tax implications, I don't think there are any tax accountants that post on here to answer them.

poppasmurf_bewdley

mollycat wrote: »

Erm.....no, I wont!

How great it must be to have such foresight.

Even the Bank of England can't be so positive about forecasting the future.

(Sorry, I've just realised who you really are. You're Mystic Meg - you can look into the future and predict whats going to happen in the next 12 months).

PS. Can you give me the six lucky numbers for tonight's lottery?