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

ileven1225

Deleted_User said:

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.

what if we put agreement that the loan can be secured against an asset like their personal property? It means I enforce it in a way that if not paying back, he would have to use his property to repay the loan?

ileven1225

sourcrates said:

ileven1225 said:

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.

what if we put agreement that the loan can be secured against an asset like their personal property? It means I enforce it in a way that if not paying back, he would have to use his property to repay the loan?

cymruchris

If you don't mind throwing your money off a cliff-top - then it's also ok to loan it to your friend, as the outcome can be very much the same. For me the risk would be far too great - and the headaches and the hassle trying to get the money back would just not be worth it. If you have £50 million in the bank - and can afford to lose £50k - go for it.. If you're going to be loaning a significant percentage of your savings - then I'd be walking away, making up some excuse that something has come up in the family, and the funds are needed elsewhere, but wish them the best on making it work. (and then see if they stay friends)

MEM62

ileven1225 said:

Deleted_User said:

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.

what if we put agreement that the loan can be secured against an asset like their personal property? It means I enforce it in a way that if not paying back, he would have to use his property to repay the loan?

Forcing him to sell the house to recover your monies will cost you a small fortune in legal fees.

You came to this forum for advice and the advice you are being given is that this is not a good idea and that there is no practical way of protecting your money.  Yet you seem to be ignoring all that (very sound) advise and are intent on lending to this guy.

At the end of the day it is your money so lend to him if you must but accept that there is a very real chance that you will not get it back and, when that happens, there will be little or nothing that you can do about it.  

MattMattMattUK

ileven1225 said:

Update:

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

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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

Never lend money to friends or family unless you are prepared to lose both the money and the friend/family member. 

[Deleted User]

You can't just come up with a bit of paper that you sign that puts a charge on his house - the mortgage lender (if he has one) will want first dibs anyway and are they going to agree to force a sale so you can get your second charge? Highly unlikely.

He says he has 100k of his own money, what if he's playing 3 of you off and he's borrowing 50k from everyone, pretending he's got 100k

Sncjw

Why can't he just ask the mortgage lender for more money. 

If its for doing the house up could he not just do it when he can with money he can afford 

Thrugelmir

ileven1225 said:

sourcrates said:

ileven1225 said:

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.

what if we put agreement that the loan can be secured against an asset like their personal property? It means I enforce it in a way that if not paying back, he would have to use his property to repay the loan?

You cannot enforce it if an existing chargeholder has preemptive rights. You'll be at the back of the queue. 

Is your friend going to cover your legal fees. As any agreement needs to be drawn up very precisely. 

EssexHebridean

I assume that this person is a "friend"  you are more than happy to lose? (Because there is a strong likelihood that is what you are setting yourself up for here). If so, then why would you want to lend them money in the first place?  

Take your 50k and invest it. There is still an element of risk, but it's a heck of a lot safer than plan A. Better still, buy the max holding of Premium Bonds - no interest, but on that level of holding it would be surprising if you didn't win fairly regular prizes over a 1.5 year period. And if you don't? At least your 50k is still intact. 

EssexHebridean

Deleted_User said:

You can't just come up with a bit of paper that you sign that puts a charge on his house - the mortgage lender (if he has one) will want first dibs anyway and are they going to agree to force a sale so you can get your second charge? Highly unlikely.

He says he has 100k of his own money, what if he's playing 3 of you off and he's borrowing 50k from everyone, pretending he's got 100k

The OP mentioned using a CH1 at one point, but as you rightly say, that would be a second charge at best - so the likelihood of it being worth the paper it's written on if it came to it would be fairly slim I'd guess.