Large, Private P2P Loan(s)

moegreene

Hi, has anyone any experience of setting up what I guess would be called "a large P2P private loan"?
Example: I have just negotiated a personal private loan with a friend, where I'm offering him 10% interest for a 9 month, £25k loan.
I'm obviously getting stung interest-wise but I don't mind too much a) because he's a mate and I really appreciate the trust and the gesture and b) more importantly because this is a loan totally off the credit file.
If I was looking to do more of this, and say borrow £85k per year for the next 3 years (ie paid in £85k tranches, each year for 3 years, with a total loan of £255) from an individual, how would I go about doing this? How would it be structured?
Clearly collateral for the private lender is essential, so I presume this would involve a private charge over one of my properties in the contract in the event I default on the loan? And what would a fair interest rate to both sides be?
Any thoughts much appreciated.
PS. I know what you're thinking, why would you pay more when you could probably stitch together the borrowing from multiple conventional channels? Or have second charges against your properties? Big Brother, basically. I am not, nor ever will be, a fan of some central organisation knowing every little, itty, bitty tiny thing about me. Those hard and soft credit checks? Not a fan. In fact, they make me a bit queasy. Irony being I have a pristine credit rating, but still - would far rather pay more for a private deal.

[Deleted User]

You're unlikely to get a commercial loan in any case if you have a very thin file. Although a CRA will tell you that you have a pristine credit rating, they still won't lend you money and obviously a real lender won't care what they think.

Are your properties mortgage free? If not, you will need to get agreement for a second charge from your lender.

It would be far better to get a mortgage on one of the properties assuming you could find a lender, but if not, ask your friend for their view on the return they want, while you establish what collateral you can offer.

Yahoo_Mail

Certainly a novel angle to use as a troll thread, not taking out loans with actual lenders because they're a conspiracy nut.  10/10 for the effort at least.

tacpot12

10% would be a fair interest rate at the moment. Lending between individuals is more risky and your friend deserves to be compensated for this risk. 

It might be as well to set the interest rate as 10% above the Bank of England Base rate, so that your friend is not disadvantaged by being tied in to lending you money at a worse rate than he could get elsewhere.

They will need a charge on the property you are buying, and you will need a loan agreement that covers off what happens if your fail to pay, or one of you wants to end the agreement, or he or you die. You should have the loan agreement checked by your own solicitor as should your friend.

If it is vitally important that you are able to borrow the subsequent tranches, you might want to consider what the risk is that your friend cannot lend you them. If they dies, their heirs are very unlikely to want to lend you any more money, and may call in the existing loans (if the agreement allows for this). Where would this leave you? 

You won't have any such issues with a commercial lender, as it is their business to lend. They have all the legal agreements prepared and will treat you better than your friend if you default - they won't take it personally. No commercial lender is remotely interested in knowing anything about you OTHER than to check that you are likely to repay the loan. Once they have established this, you can be sure that they will never look at that information again, unless you default. The worst that might happen is you get marketing messages that you have to opt out of.

jonesMUFCforever

I wish I had a mate that would lend me £25! As for £25k yeah right.

[Deleted User]

moegreene said:

Hi, has anyone any experience of setting up what I guess would be called "a large P2P private loan"?
Example: I have just negotiated a personal private loan with a friend, where I'm offering him 10% interest for a 9 month, £25k loan.
I'm obviously getting stung interest-wise but I don't mind too much a) because he's a mate and I really appreciate the trust and the gesture and b) more importantly because this is a loan totally off the credit file.
If I was looking to do more of this, and say borrow £85k per year for the next 3 years (ie paid in £85k tranches, each year for 3 years, with a total loan of £255) from an individual, how would I go about doing this? How would it be structured?
Clearly collateral for the private lender is essential, so I presume this would involve a private charge over one of my properties in the contract in the event I default on the loan? And what would a fair interest rate to both sides be?
Any thoughts much appreciated.
PS. I know what you're thinking, why would you pay more when you could probably stitch together the borrowing from multiple conventional channels? Or have second charges against your properties? Big Brother, basically. I am not, nor ever will be, a fan of some central organisation knowing every little, itty, bitty tiny thing about me. Those hard and soft credit checks? Not a fan. In fact, they make me a bit queasy. Irony being I have a pristine credit rating, but still - would far rather pay more for a private deal.

You already have a mortgage according to your other thread. It’s going to stay on your credit files for the next 6 years. I can’t see what benefit paying more interest to have some non-reportable borrowing is going to have. It’s the total opposite of money saving. 

In your other thread you said there was no way you’d pass affordability for your mortgage now so why is borrowing the same money at a higher rate more affordable. 

I don’t know if you’re a troll or a member of the tinfoil hat brigade but the idea is ludicrous and I don’t know why you’d want to drag a friend down with you.  Instead of borrowing the money from some “central organisation” in the first place you should have become a FMOTL because you sound like you’re half way there already. 

k12479

tacpot12 said:

10% would be a fair interest rate at the moment...

Personally, I'd want waaay more than 10%. The lender is locked in, if they need or want to exit there's little likelihood of selling the loan on, if repayments stop or they have to force a sale of the property, they'll rack up losses, time and expenses. Plus it would appear the private lender is not experienced in this so likely no portfolio of loans, exacerbating the risk.

HobgoblinBT

If the loan is secured by a 2nd charge over the borrowers domestic property, there are a whole raft of rules for the lender to strictly follow in order to comply with the consumer credit act. Failure to comply can render the security unenforceable in the event of default.  

Simple errors, like using the incorrect wording on a default notice and not issuing advance draft copies of the loan within the correct timescales make the whole process a bit of a headache.  So much so that the bank that I worked for stopped lending on CCA loans secured by 2nd charges over domestic property for individuals, sole traders and partnerships.

If I was speaking to the lender, I would advise don’t do it.  On the other hand for the borrower...........

Dr_Crypto

Would it be covered by the CCA? 
I've no idea and there are clearly a number of exemptions to the CCA. https://www.legislation.gov.uk/ukdsi/2013/9780111100493
If I were the lender I'd be getting a good quality solicitor to draw up the agreements and deal with any charges on domestic property, or probably not get involved at all. 

bris

The threads get better every day, can you send the individual who will give you 85k my way too please.