Fair rate for 9 month £50k loan?

blunkmore

Thinking of making a loan as above and putting a charge on the borrowers property to secure it. Loan would be repayable on full after nine months from lump sum to be released from fixed term Investment. Borrower has clean credit history and substantial assets but no/retirement income. I need to put the money away to meet future tax liability anyway. What would be a fair rate to charge?
Thanks

DevCoder

Do you have a consumer credit license?

blunkmore

Fair point about the CCL. However I had transferred the actual situation into a more standard parallel one for comparison and ease of understanding. Consider the question a hypothetical one based on a hypothetical CCL and the effect is the same. What would a fair rate be in those circumstances?

JuicyJesus

blunkmore wrote: »

Fair point about the CCL. However I had transferred the actual situation into a more standard parallel one for comparison and ease of understanding. Consider the question a hypothetical one based on a hypothetical CCL and the effect is the same.

-4%. Yes, minus four. You should pay them to lend them the money.

blunkmore

Would you care to explain? If you think that would be a good deal, I'm prepare to borrow some money from you at just -3%.

DevCoder

Hypothetically anything between 1.1 (lets assume 3 month LIBOR + half) and 10%

Lowering the upper limit because the loan is secured.

Assuming capital + interest at maturity then interest would be 277.23 on 3mLibor+50bp and 2520.55 on the 10%

opinions4u

Whatever rate you choose, don't forget to charge a £1,995 product fee.

I'd also make the borrower pay a surveyor to produce you a report on the future saleability of the property. Any legal costs should also be paid by the borrower.

Brassedoff

6.5% plus your costs of the charge. A totally formatted loan agreement with the correct default and termination paperwork.

You are above CCL rate.

CKhalvashi

Brassedoff wrote: »

6.5% plus your costs of the charge. A totally formatted loan agreement with the correct default and termination paperwork.

You are above CCL rate.

I'd go more along the 0.5% a month route, which is about 6.5% APR, plus costs.

CK

jamesd

blunkmore wrote: »

Thinking of making a loan as above and putting a charge on the borrowers property to secure it. Loan would be repayable on full after nine months from lump sum to be released from fixed term Investment. Borrower has clean credit history and substantial assets but no/retirement income. I need to put the money away to meet future tax liability anyway. What would be a fair rate to charge?

A CCL isn't necessarily required for such lending so far as I know, so that issue can be moot even if you don't have one, so long as you're not doing this as a business activity. Anyone who believes lending to make money does always require a CCL should look at the investors using Zopa who have a million Pounds or more lent without a CCL. I don't know the specific rules for secured lending, though.

The rate depends on the risk of the borrower and to you, which in turn depends on how big a part of your total assets you'd be lending. If it's a lot of your total assets the risk to you is much higher and you'd need a return sufficient to compensate.

Forcing sale of a property to get money out of security is not trivial and may not be accepted by a court even though it is possible in the right circumstances.

Is there already a first mortgage secured on the property? Any other borrowing secured on it?

Are you doing this as a form of charity for a family member or friend or do you want good and normal commercial returns on it?

If you want commercial terms, take a look at the market for bridging loans. Those are where I'd expect the borrower to go if they don't go with you. Think in terms of 1-2% a month sort of range.

If you are considering this as an investment activity you might also usefully learn more about isePankur, which may be suitable for those with the assets available to do the sort of thing you're considering. Do a search here to start with.

HappyMJ

blunkmore wrote: »

Thinking of making a loan as above and putting a charge on the borrowers property to secure it. Loan would be repayable on full after nine months from lump sum to be released from fixed term Investment. Borrower has clean credit history and substantial assets but no/retirement income. I need to put the money away to meet future tax liability anyway. What would be a fair rate to charge?
Thanks

£1,500 plus costs...that'll be about 4% interest and your costs covered. I think that's quite fair. You possibly can't get 4% on your savings and I assume they can't borrow at 4%. Any higher rate and they'd be better off just getting a mortgage.