how do I protet myself if I lend money

Trishy_M

Hello,


I have a close relative who took out a loan that ended up being secured on the house. I think the company is called Together. Anyway he had problems a while back but spoke to them as you're supposed to, had payments agreed with them but they put charges and interest on and ruined his credit rating so the outstanding balance is more than at the start. He has been making their extortionate payments now for a few years but it won't be paid off for a long time. Its APR is really high.


We are agreed the loan has to go.


He is self employed so can't get a re-mortgage with a real bank (tried) but has an existing mortgage for £32000 that’s ok.


House = £140,000, mortgage £32,000 loan now £40,000.


I have excellent credit rating and equity in my house with a mortgage. House £140, mortgage £50. I have spoken to a lender and can get a good mortgage and in theory I am able to do one of the following:-


*We thought about me buying the house for £72,000 with a ‘gift’ of the difference to clear the mortgages on it with him making the payments (safe for me with the mortgage on that house not mine and property in my name) but I would have to be a landlord & work out tax etc and the stamp duty £5400 and solicitor fees will put £7000+ on top of the loan. We think that would be better coming off the balance.


*I take 2nd mortgage for £40000 on my house and he pays the repayment each month on top of his mortgage for 15 years until clear. He can afford the payments.


Sounds straight forward and I don’t believe there is any intention to take the money and run but stuff happens so:-


Would we need solicitors for a loan agreement or do it ourselves?


Can I make sure I get the outstanding money back if the house is sold?


Can I put anything and enforce it if there is a problem with the payments?


What if he dies?


Any ideas would be appreciated please.

McKneff

Don't do it.

Thats the only way to guarantee you wont be shafted

Reaper

Several things concern me.
* You have not included losing his job in your list. There is a reason banks are wary of the self employed because they view their income as less dependable.
* If his past problems are over can he not increase his payments to clear the loan faster? If not because he is stretched that does not look good for the security of your loan repayments.
* If he dies you will be an unsecured creditor
* You would have to get any agreement in writing. Considering it's a fairly large sum I suggest a solicitor to draw up any contract and answer the sort of questions you have. The mortgage option is safer as at least you have security.
* If he is unable to make all the repayments either deliberately or not this will put a strain on or end your friendship.

Trishy_M

Thanks
Whilst I agree with you on the not doing it, it has got silly with the loan company. I have searched on here for them and the only thing to do is pay them off. He is already paying £600p/m, with a real company this would have made a massive dent in the loan already.

thriftylass

Just don't do it. The risks are too high. Unless you have the money to just gift him 40k, don't. There are so many unforeseen, unexpected factors to consider.

BTW just out of interest what is the term of the loan and the APR.

inflationbuster

Talk to citizens advice about the extortionate loan? They may advise restructuring it.

Let your relative sort out the loan.

Lungboy

Trishy_M wrote: »

He is already paying £600p/m, with a real company this would have made a massive dent in the loan already.

Not really, on a large loan like that it will take years to make a dent in the capital repayment.

aroominyork

Two pieces of advice about lending money: 1) only do it if you are ready to see it as a gift which is not repaid, and 2) anyone you lend money to will end up hating you.

That doesn't mean don't do it, but go in with your eyes open and wary of turning someone else's problems into your own.

xylophone

He might have to consider selling his property and renting a home?

ChesterDog

You are in danger of turning his problem into your problem.

I have lent money to three relatives/friends over the years.

Once they have it, they seem to develop the view that you mustn't have needed it yourself after all and won't miss it.

PeacefulWaters

Don't do it X 1,000,000.

Would we need solicitors for a loan agreement or do it ourselves?

Solicitors. You'd be nuts to do this on the back of a fag packet.

Can I make sure I get the outstanding money back if the house is sold?

Yes. A legal charge can be placed on his property in your favour.

Can I put anything and enforce it if there is a problem with the payments?

You can call him a very naughty boy or send the boys round.

What if he dies?

Life assurance policy on his name in your favour.

Any ideas would be appreciated please.

Just don't do it. He's already mismanaged his loan commitment. It's not a track record you want.