Should I get a signed letter/contract for lending £3k to a colleague?

chris112

Does anyone know of the correct structure and contents to produce a letter for a loan I am making to a colleague

i do trust them but this is just as a security in the event of us falling out or for any other reason that may jeopardise thei repayment 

It will be fo r.£3k so can't afford to risk i was told by someone in the past though The legal validity you may have goes out the window if you don't have the debit in writing and signed 

[Deleted User]

You could find a template on the internet. It needn't be complicated - amount, repayments and term.

But two things to bear in mind. Unless you're prepared to enforce the agreement legally, it's worth nothing, And if your colleague has no money, he still won't pay you.

You say  you can't afford to risk it, so the best advice is DO NOT LEND IT. Because otherwise, you're risking it - and the risk is pretty high. If they can't get a loan from anywhere else than someone at work, there's a reason for that.

impoverishedtraveller

If the borrower can’t get a 3k loan from a bank or other lender then chances are you aren’t going to see that 3k back in your pocket either.

Blue_sky101

Hi Chris. I know it’s not exactly official but from watching similar scenarios on Judge Rinder(he is a qualified barrister after all) he always reiterated  the importance of putting the agreement in writing.

Date of agreement, amount borrowed, interest charged. any regular payments agreed on, or date you expect the loan back in full etc. Both parties to sign. 

I’m sure someone will be along to give you advice from a more official source 🙂

Nifty_Purse

If you can't afford to lose it don't lend this money. 
Your colleague can use a credit union if they can't borrow from their bank or building society.

A legal agreement can only really protect you if it is drawn up by a solicitor. 

MEM62

chris112 said:

Does anyone know of the correct structure and contents to produce a letter for a loan I am making to a colleague

Any such agreement would be worthless if your colleague does not have the means to pay.  The protection / assurance you are seeking is not available.

chris112 said:

i do trust them but this is just as a security in the event of us falling out or for any other reason that may jeopardise thei repayment 

Most people do, until they find that both the friendship and their money is gone.  

chris112 said:

It will be fo r.£3k so can't afford to risk 

Then don't lend it.  What you are proposing to do is high risk and you are likely to loose your money.  

I am assuming that your colleague has come to you because they cannot borrow from mainstream lenders. That tells you that mainstream lenders consider them to be too high risk.  These guys are experts in assessing that risk - what makes you think you know better?     

mr_stripey

There's a decent chance you won't get the money back. Or maybe you'll receive a couple of repayments before one is skipped. I've done this before with friends ( a long time ago ) both as a borrower and a lender and it is a nightmare.

You have to have a hell of a lot of trust in someone to hand over 3K. Even if they have the very best intentions it is probable that they may experience difficulties (hence why they are asking you, rather than the bank for a loan). 

What do they require the money for?

mcpitman

chris112 said:

Does anyone know of the correct structure and contents to produce a letter for a loan I am making to a colleague

i do trust them but this is just as a security in the event of us falling out or for any other reason that may jeopardise thei repayment 

It will be fo r.£3k so can't afford to risk i was told by someone in the past though The legal validity you may have goes out the window if you don't have the debit in writing and signed 

Just don't lend them the money. That's probably best for all parties involved, these things rarely go well for all the reasons pointed out in previous threads.

cymruchris

If you can't afford to lose the money - don't lend it. Yes it'll be a bit of sourness for your friend to accept (but will also be a true test of the friendship). There are 'options' if they need money urgently - and you haven't outlined the reasons why they are coming to you (and you don't need to) - but no matter what you have written on a piece of paper, if they don't have the money to repay, they don't have the money. No piece of paper is going to magic the money from thin air (unlike how politicians always seem to manage it). So yes, if you can afford to lose the money, or the friendship, or both - go ahead with a written record signed by both parties and hope for the best - otherwise don't do it.

I remember many, many, many years ago having an old car for sale - and a 'friend' at the time wanted it but couldn't afford it, agreed to pay it over three monthly payments. Paid month one with the car collection - never heard from them after that, they moved away, and were untraceable. I had it written on a piece of paper - never got me anywhere. A lesson learned, and I've never loaned money in any shape or form since. 

[Deleted User]

Blue_sky101 said:

Hi Chris. I know it’s not exactly official but from watching similar scenarios on Judge Rinder(he is a qualified barrister after all) he always reiterated  the importance of putting the agreement in writing.

Date of agreement, amount borrowed, interest charged. any regular payments agreed on, or date you expect the loan back in full etc. Both parties to sign. 

I’m sure someone will be along to give you advice from a more official source 🙂

Getting advice from a TV show is not a great idea. You can put all you want in a letter, OP is not a licenced credit operator so charging interest will be fun and a letter is worthless if the friend cannot pay the money back or refuses to - even a CCJ with the costs added on is worthless if the friend has no money, paying high court bailiffs to go and take stuff to sell will probably not yield much either - all it will do is inconvenience them for getting credit for 6 years and by the sounds of it, they aren't exactly suitable for lending anyway.

chris112 - if your friend cannot get credit from even sub prime lenders, there is a reason for that. That same reason is why you won't get 3k back.

You can probably find 101 stories on here about people trying to get money back from friends and relatives and how it's impossible to do so if the colleague doesn't want to. What if they get the 3k then hand their notice in and disappear? 

sourcrates

You might as well accept an IOU from said friend, as there isn`t an agreement in the world that cannot be reneged on.

Sure if you have an agreement in writing you may win in court, but then what ?

Obtaining judgement and enforcing that judgement, are two very different things altogether.

Basically a savvy individual, can side step most enforcement action a court can approve.

So it doesn't matter what kind of agreement you may think you have, if they don`t have the money, or refuse to pay it, there is very little you can do.