Personal Loan Agreements between friends
Hard_food_for_midas
Posts: 115 Forumite
in Loans
Dear All,
having read one of the threads about getting a proper loan agreement in place, I have found this simple loan agreement online. I wish to use this as a template for a loan I will give. Please could you look over it and let me know that this will work ok. The money will also be traceable, from one bank account to another.
The only niggle I have, is that if there is a default, I would wish to have the % stake in the home of this person (who would have been using that as collateral anyway. Not that I am foreseeing this happening, I am just covering my back and following the advice from people on this site who have had their fingers burned.)
Many thanks,
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") dated this 8th day of October, 2013
BETWEEN:
XXXX
(the "Lender")
OF THE FIRST PART
AND
XXXX
(the "Borrower")
OF THE SECOND PART
IN CONSIDERATION OF the Lender loaning certain monies (the "Loan") to the Borrower, and the Borrower repaying the Loan to the Lender, both parties agree to keep, perform and fulfil the promises and conditions set out in this Agreement:
Loan Amount & Interest
1. The Lender promises to loan £XXXX GBP to the Borrower and the Borrower promises to repay this principal amount to the Lender, at such address as may be provided in writing, with interest payable on the unpaid principal at the rate of 10 percent per annum, calculated daily but added monthly.
Payment
2. This Loan will be repaid in full eighteen (18) months from the execution of this Loan, however a review of this agreement will be carried out on or before the 7th April, 2014.
Default
3. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing and interest due under this Agreement at that time to be immediately due and payable.
Governing Law
4. This Agreement will be construed in accordance with and governed by the laws of Country of England.
Costs
5. All costs, expenses and expenditures including, without limitation, the complete legal costs incurred by enforcing this Agreement as a result of any default by the Borrower, will be added to the principal then outstanding and will immediately be paid by the Borrower.
Binding Effect
6. This Agreement will pass to the benefit of and be binding upon the respective heirs, executors, administrators, successors and permitted assigns of the Borrower and Lender. The Borrower waives presentment for payment, notice of non-payment, protest, and notice of protest.
Amendments
7. This Agreement may only be amended or modified by a written instrument executed by both the Borrower and the Lender.
Severability
8. The clauses and paragraphs contained in this Agreement are intended to be read and construed independently of each other. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
General Provisions
9. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
Entire Agreement
10. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise.
IN WITNESS WHEREOF, the parties have duly affixed their signatures on this 8th day of October, 2013.
SIGNED, SEALED AND DELIVERED
before me, this 8th day of October, 2013
_____________________________
XXXX
SIGNED, SEALED AND DELIVEREDbefore me, this 8th day of October, 2013
XXXX
per: ______________(SEAL)
Copyright 2002-2013, LegalComplete.co.uk
having read one of the threads about getting a proper loan agreement in place, I have found this simple loan agreement online. I wish to use this as a template for a loan I will give. Please could you look over it and let me know that this will work ok. The money will also be traceable, from one bank account to another.
The only niggle I have, is that if there is a default, I would wish to have the % stake in the home of this person (who would have been using that as collateral anyway. Not that I am foreseeing this happening, I am just covering my back and following the advice from people on this site who have had their fingers burned.)
Many thanks,
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") dated this 8th day of October, 2013
BETWEEN:
XXXX
(the "Lender")
OF THE FIRST PART
AND
XXXX
(the "Borrower")
OF THE SECOND PART
IN CONSIDERATION OF the Lender loaning certain monies (the "Loan") to the Borrower, and the Borrower repaying the Loan to the Lender, both parties agree to keep, perform and fulfil the promises and conditions set out in this Agreement:
Loan Amount & Interest
1. The Lender promises to loan £XXXX GBP to the Borrower and the Borrower promises to repay this principal amount to the Lender, at such address as may be provided in writing, with interest payable on the unpaid principal at the rate of 10 percent per annum, calculated daily but added monthly.
Payment
2. This Loan will be repaid in full eighteen (18) months from the execution of this Loan, however a review of this agreement will be carried out on or before the 7th April, 2014.
Default
3. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing and interest due under this Agreement at that time to be immediately due and payable.
Governing Law
4. This Agreement will be construed in accordance with and governed by the laws of Country of England.
Costs
5. All costs, expenses and expenditures including, without limitation, the complete legal costs incurred by enforcing this Agreement as a result of any default by the Borrower, will be added to the principal then outstanding and will immediately be paid by the Borrower.
Binding Effect
6. This Agreement will pass to the benefit of and be binding upon the respective heirs, executors, administrators, successors and permitted assigns of the Borrower and Lender. The Borrower waives presentment for payment, notice of non-payment, protest, and notice of protest.
Amendments
7. This Agreement may only be amended or modified by a written instrument executed by both the Borrower and the Lender.
Severability
8. The clauses and paragraphs contained in this Agreement are intended to be read and construed independently of each other. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
General Provisions
9. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
Entire Agreement
10. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise.
IN WITNESS WHEREOF, the parties have duly affixed their signatures on this 8th day of October, 2013.
SIGNED, SEALED AND DELIVERED
before me, this 8th day of October, 2013
_____________________________
XXXX
SIGNED, SEALED AND DELIVEREDbefore me, this 8th day of October, 2013
XXXX
per: ______________(SEAL)
Copyright 2002-2013, LegalComplete.co.uk
0
Comments
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Not worth it...don't do it. No repayment = loss of friendship.
Why do they NEED the money? Why can't they go to a mainstream lender?
You shouldn't charge friends interest..if you do lend them money it's interest free. If you did charge interest you would have to register as a money lender and declare the interest for tax. Too much hassle. If they wish to gift you something at the end of the agreement then it's up to them.:footie:
Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money. 0 -
I will do this and they are happy to be paying something for the convenience of it. I know why they are borrowing it and it makes total sense. I have trusted this person for over 25 years and we have always been able to help each other out at various times.
Normal lenders are giving them the run around.
Thanks for letting me know about registering myself. I have no desire to be a money lender. Ideally, I would have just invested in this guy's company directly, but it's the hassle of getting the company valued and calculating a percentage stake that is a nightmare for them and me. So, this seemed like the simplest option.0 -
Ok..... your agreement is not valid as you are calling yourself a lender when you aren't. Lending money and expecting payment with interest is acting as a loan shark, is illegal and your agreement will be completely ignored if you had to take your friend to court. Rewrite the agreement as an agreement between friends....without any interest. As I said earlier if they wish to reward you at the end by gifting you something in addition to the original amount you lent them then that's up to them....and you have no HMRC reporting requirements.Hard_food_for_midas wrote: »I will do this and they are happy to be paying something for the convenience of it. I know why they are borrowing it and it makes total sense. I have trusted this person for over 25 years and we have always been able to help each other out at various times.
Normal lenders are giving them the run around.
Thanks for letting me know about registering myself. I have no desire to be a money lender. Ideally, I would have just invested in this guy's company directly, but it's the hassle of getting the company valued and calculating a percentage stake that is a nightmare for them and me. So, this seemed like the simplest option.
You could get around the Office of Fair Trading (OFT) registering requirements by the both of you registering on ZOPA...you as a lender (technically an investor) and your friend as a borrower. They have the licenses from the OFT to do what they do and help you resolve your friends problem. Also, if your friend becomes sick or dies and can't pay then ZOPA can pay you anyway as there is an optional insurance product covering non payment.:footie: Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money. 0 -
Hard_food_for_midas wrote: »I will do this and they are happy to be paying something for the convenience of it. I know why they are borrowing it and it makes total sense. I have trusted this person for over 25 years and we have always been able to help each other out at various times.
Normal lenders are giving them the run around.
Thanks for letting me know about registering myself. I have no desire to be a money lender. Ideally, I would have just invested in this guy's company directly, but it's the hassle of getting the company valued and calculating a percentage stake that is a nightmare for them and me. So, this seemed like the simplest option.
No agreement you write down will be worth the paper it's printed on in reality. You may be able to sue them eventually through the court and you might even win, but extracting the money is another matter entirely.
Never lend money to friends unless you can afford to lose it. If you cant afford to lose it, dont lend it - it's as simple as that. I've lent money to 'friends' I've known for nearly 30 years and I'm still waiting for it to come back - it never will. Almost every one you ask will tell you exactly the same story, once lent, it is lost. I've almost never heard of an exception to that rule. We all make the mistake of thinking it will be different for us and our particular friends, but I've never heard of this working out...ever.Debt Free! Long road, but we did it
Meet my best friend : YNAB (you need a budget)
My other best friend is a filofax.
Do or do not, there is no try....Yoda.
[/COLOR]0 -
That'll be because normal lenders have a long history of lending so know the things to look for which prevents them being turned over.Hard_food_for_midas wrote: »Normal lenders are giving them the run around.
It is seldom a good idea to mix friendship with business.
Lets face it, if the repayments to you stop for whatever reason, you will become reliant upon your agreement letter to enforce payment.
If the repayments stop, it is likely they can no longer afford to repay you, so what good is the letter going to be?
Would you really try to force your good friends of 25 years to sell their house so you can get your money back?
There is no room for compassion in business, ask all the Payday defaulters who lost their jobs in the three weeks between borrowing and repaying.0 -
Ok..... your agreement is not valid as you are calling yourself a lender when you aren't. Lending money and expecting payment with interest is acting as a loan shark, is illegal and your agreement will be completely ignored if you had to take your friend to court. Rewrite the agreement as an agreement between friends....without any interest. As I said earlier if they wish to reward you at the end by gifting you something in addition to the original amount you lent them then that's up to them....and you have no HMRC reporting requirements.
This seems to be the best option, thanks.
I called Zopa and it won't work that way. I'm not wanting to direct my money at a whole load of businesses over years...but thanks too.0 -
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Dont do it.
Even though you have taken more time and care than most who lend friends money, the only benefit you will have if they dont pay you back is a piece of paper with an X friends signature on it to remind you of that fateful decision!!
Have a read of this thread for many horror stories of family members, lifelong friends etc ripping their relationships and families apart!!
http://forums.moneysavingexpert.com/showthread.php?t=769530 -
dealer_wins wrote: »Dont do it.
Even though you have taken more time and care than most who lend friends money, the only benefit you will have if they dont pay you back is a piece of paper with an X friends signature on it to remind you of that fateful decision!!
Have a read of this thread for many horror stories of family members, lifelong friends etc ripping their relationships and families apart!!
http://forums.moneysavingexpert.com/showthread.php?t=76953
Thank you. That was the thread I was referring to when I said I'd looked into it...0 -
That'll be because normal lenders have a long history of lending so know the things to look for which prevents them being turned over.
It is seldom a good idea to mix friendship with business.
Lets face it, if the repayments to you stop for whatever reason, you will become reliant upon your agreement letter to enforce payment.
If the repayments stop, it is likely they can no longer afford to repay you, so what good is the letter going to be?
Would you really try to force your good friends of 25 years to sell their house so you can get your money back?
There is no room for compassion in business, ask all the Payday defaulters who lost their jobs in the three weeks between borrowing and repaying.
Normal lenders can be a bit slow on the uptake and not dynamic enough for small/medium size businesses - look at all the headlines - money from banks is not getting through to our businesses. Where it is, it trickles, crippling our economy.0
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