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Offering a Loan to a Friend

edited 30 November -1 at 1:00AM in Loans
12 replies 1.6K views
FingerbobsFingerbobs Forumite
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edited 30 November -1 at 1:00AM in Loans
Firstly, apologies if this is the wrong forum for this query. I couldn't see a more suitable one, but I appreciate it's not quite the right topic, so I fully anticipate the post being moved :-)

A friend was looking to upgrade their mobile phone handset via their network provider, and I pointed out that it would be much cheaper in the long run to buy the phone SIM-free from a retailer, and just remain on their existing mobile tariff.

As they can't afford the full cost up-front, I've suggested that I could purchase a discounted Gift Card (via my employer's perks scheme), and they could use this to buy the phone and pay me for it at the same rate that they would have paid their network provider.

Basically, I'm buying them a Gift Card for a specific retailer, and they are paying me for it in instalments over a period of time.

Obviously I don't anticipate any problems or I wouldn't even entertain the idea, but I would like to formalise this loan on paper, so I would have some recourse should things happen go wrong further down the line.

Can anyone recommend a free template I can use for the agreement? There are loads out there on the Web, but I don't just want to pick a random one in case it's not "watertight" if you know what I mean.


  • newatcnewatc Forumite
    621 posts
    500 Posts Third Anniversary Name Dropper
    In my experience lending to a friend is a good way to lose both friend and money.
  • zx81zx81 Forumite
    28.9K posts
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    I wouldn't bother with an agreement.

    Even if you have one, you still need to go through the various legal channels to enforce it and if he doesn't have the money, you still won't get your money back.

    If you lend it to him, just assume you won't get it back. If you do, it's a bonus.
  • sourcratessourcrates Forumite, Board Guide
    20.9K posts
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
    Before you lend the money make sure you agree exactly:
    • How much you will lend
    • The interest rate
    • The term
    • How much they will be expected to repay each month
    It is essential that you are both aware of all of these conditions before any money is exchanged.
    Write a contract

    Drawing up a written agreement or contract which lists all the agreed terms of the loan makes it clear what you are agreeing to, and also provides you with a record of the agreement should there be any dispute.
    You and your friend should both sign it in the presence of independent witnesses.

    Even doing all this does not guarentee you will be paid back, if the borrower does fail to repay the debt, then the legal system is there for you to use.

    As a warning to you, this forum has had hundreds of such posts such as yours where the debtor bid not repay the lender, and both money, and freindship were lost.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File and Ratings, Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to:
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    Any views expressed are mine and not the official line of
    For free debt advice, contact either : Stepchange, National Debtline, CitizensAdviceBureaux.
  • Sea_ShellSea_Shell Forumite
    4K posts
    1,000 Posts Fifth Anniversary Name Dropper Hung up my suit!
    They should save up and/or buy a cheaper phone!!

    If you're happy to possibly lose your money, your friend, or both, go ahead.

    Agreements are worthless unless you're prepared to go to court to enforce them!
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow ":beer: JOB DONE!!
    This should now read "It's time to start digging up those Squirrelled Nuts"!!! :j:j:j
  • RyanEzioRyanEzio Forumite
    100 posts
    I wouldn't bother of I was you. Why have a phone so expensive?
  • venisonvenison Forumite
    4.8K posts
    1,000 Posts Fourth Anniversary Name Dropper I've been Money Tipped!
    Friends/family and money never mix well.
    MSE bring back discussion Time, its removal is an outrage at best and an attempt at censoring at worst !
  • foxy-stoatfoxy-stoat Forumite
    6.4K posts
    Fifth Anniversary 1,000 Posts Name Dropper
    Fingerbobs wrote: »
    Can anyone recommend a free template I can use for the agreement? There are loads out there on the Web, but I don't just want to pick a random one in case it's not "watertight" if you know what I mean.

    Apart from receiving answers to questions you didn't ask, all correct by the way, if you have found a free template then use it if you feel you have to. Nothing will be "watertight", and I do not know what you mean. Unless your in the business in loaning money, and have the resources and time to chase people down for ever to get your money back then forget about trying to formalise this loan. We will see you in a few months when your friend stops paying you and you start asking questions about claiming your money back.

    Good luck, you may need all of it.
  • FingerbobsFingerbobs Forumite
    1.1K posts
    Ninth Anniversary 1,000 Posts Name Dropper
    Thanks all for the advice.

    I have taken all this on board, and thought very carefully about the consequences, and reached the conclusion that it's not worth it. It's none of my business if they want to pay for a stupidly expensive phone - that's up to them - but they can just pay for it via their contract as they were planning to do anyway. I just thought I could save them some money, but it's not worth the potential hassle further down the line if things go pear-shaped.

  • tealadytealady Forumite
    3.5K posts
    Part of the Furniture 1,000 Posts Mortgage-free Glee! Debt-free and Proud!
    There is a very old saying which goes something like this.
    "Never lend people money that you cannot afford to lose"
    You made the right decision IMO.
    Proud to be an MSE nerd
    Judge people by their achievements, not by their mistakes
  • TripleHTripleH Forumite
    611 posts
    500 Posts First Anniversary
    Well done fingerbob forvat least thinking of and trying to help a friend save money. Hopefully your friend may deep down have a lightbulb moment and if they have to have the latest phone, mightvthink about creating a fund to save up for the next one.
    Wherever you go, whatever you do Richard Marx is right there waiting for you.

    Sweet dreams!
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