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Lending £50k to a person I know, is there any legal template in place?

ileven1225
ileven1225 Posts: 176 Forumite
Fifth Anniversary 100 Posts Name Dropper
edited 9 February 2022 at 9:02PM in Loans
---------------Update 2022/02/09 ----------------------------------------------------------------------------------------------------
Hi everyone, thanks for the advices. Now I decided not to lend any money to my friend as there is no way of protection as much as a licensed approved lender. Even a licensed lender might have difficulty to get money back, I do not think I got any higher chance if my friend decides not to return the loan at all. Any piece of contract would not take any effect if no enforcement in place.

I got one more question, what if I am the part of his project and got shares proprotional to my input (e.g £50k)? In this way, i can control the process and work as a partner rather than a lender? What sort of paper  work or contract I need to use and pay attention to?


---------------Update 2022/02/07 ----------------------------------------------------------------------------------------------------
What if we put agreement that the loan can be secured against an asset like their personal property?
Can we use the following form - Legal charges: registration (CH1) - to achieve this goal? BTW, he will purchase a property to add values and resell.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/808690/CH1__2019-06-17_.pdf
Thanks

---------------Orgianl Post ----------------------------------------------------------------------------------------------------
Hi everyone,

Would need some help. A person I know would like to borrow £50k from myself and promised 10% return over 1.5years. So 1.5 years later, I would get £55k. The reason I would like to help him (he got some good business ideas and I think it's gonna work but with some risks for sure) is that I have been watching him for some time and his performance gave me confidence. However, it doesn't mean the idea cann't be a crap but this is the risk I would like to take.

My question is that as this is the 1st time I lend money to people, I usually borrow money from banks/lenders and never be lender by myself, I would like some advices to protect myself and understand if there is any legal process/document I can use. For example, a loan form with legal effects states that he borrowed £50k from myself with 10% return in 1.5years. In case he refused to acknowledge the money he borrowed.

Thanks








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Comments

  • pjcox2005
    pjcox2005 Posts: 1,018 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    If you plan on taking this on, then perhaps better to ask a lawyer to draft and ideally see if you can secure against an asset like their personal property.

    The other one, is presumably these are business ideas. If they are being developed in a corporate then would you be better off taking a shareholding to support investment and benefit from future returns if it goes well.

    If you are not risk averse at all and can afford to lose the money then you could document it yourself, get it signed and witnessed but as mentioned before it's only useful if you are enforcing.

    I personally think lending to family, friends etc. is fine (can be very good) as long as you go in eyes open that you could be burnt. For many it works out very well, but there are also a lot of worst case stories as normally it's being requested as a bank won't lend.
  • Ergates
    Ergates Posts: 2,771 Forumite
    Part of the Furniture 1,000 Posts Name Dropper

    My question is that as this is the 1st time I lend money to people, I usually borrow money from banks/lenders and never be lender by myself,
    There's a reason for this.

    ileven1225 
    I would like some advices to protect myself
    OK - don't, under any circumstances, do this.  Nothing good will come from it.
  • Just to reiterate all the above, you have no way of guaranteeing that you will see the money again, no way to enforce this if they run out. You could see it as a gift and if you get it back, great, but the whole thing could equally be a long game to scam you out of £50k, who knows
  • sourcrates
    sourcrates Posts: 30,582 Ambassador
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    Hi everyone,


    My question is that as this is the 1st time I lend money to people, I usually borrow money from banks/lenders and never be lender by myself, I would like some advices to protect myself and understand if there is any legal process/document I can use. For example, a loan form with legal effects states that he borrowed £50k from myself with 10% return in 1.5years. In case he refused to acknowledge the money he borrowed.

    Thanks
    You can have all the legal paperwork you want, signed, sealed, documented, witnessed, whatever you insist on.

    It means absolutely nothing if the chap won`t or can`t pay you back.

    Those who engage in these kind of activities are usually very good at covering their tracks, any money they do have will likely be squirreled away either in an off shore account, or a shell corporation somewhere, or even under different names, far out of reach of UK courts, bailiffs etc.

    Basically you will have no recourse whatsoever if he won`t pay you back.
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  • Any contract is only worth it if you're prepared to enforce it and if he has the means to repay it 

    As you clearly have doubts, simply don't lend it.

    Thanks. I believe what you meant is that any written document could be use as legal evidence to show he owned the money, is it correct?
  • Sounds as your friend has the ideas and wants you to bear all the risk. Run away.....

    He would input £100k as well, but still need another £50k, let's put it this way
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