Legal or informal agreement on a family loan

RiderOnTheStorm · 13 May 2018 at 11:46PM

Hi

I am seeking advice on behalf of my parents.

They have loaned my sister and brother-in-law a large sum of money so that they can buy a new car. Though they are family and everything should work out okay, they are worried about losing their money if something unfortunate happened to my sister and BiL.

They wondered about getting them to sign a contract or letter of some sort, so if something untoward happened, they can either get their money back or at least get the car so it doesn't end up in the hands of other family members.

Is an informal written agreement signed by all enough or does it need to be drawn up more professionally by a solicitor?

Any advice would be appreciated

macman · 14 May 2018 at 12:13AM

What are the terms of the loan already agreed? Repayment period, interest?
Are the borrowers prepared to agree to this, now that they already have the money? They may, in the absence of any agreement, consider it a gift.
'They are family so everything should work out OK': I suggest you browse the board some more to see what happens when money is borrowed from relatives or friends without any formal agreement. It rarely ends well.

dealer_wins · 14 May 2018 at 10:18AM

Its better to consider anything like this with family or friends a gift.

If you get the money back its great, if not well it was a gift!

Otherwise it can easily break friendships and tear families apart.

RiderOnTheStorm · 14 May 2018 at 10:07PM

macman wrote: »

What are the terms of the loan already agreed? Repayment period, interest?
Are the borrowers prepared to agree to this, now that they already have the money? They may, in the absence of any agreement, consider it a gift.
'They are family so everything should work out OK': I suggest you browse the board some more to see what happens when money is borrowed from relatives or friends without any formal agreement. It rarely ends well.

The loan has already been agreed with no detail. They are not seeking to gain interest from it. The brother in law is scheduled to receive an injury settlement at some point this year and the plan is for him to pay the full amount back out of it.

My parents just want to make sure they get there money back should the worse happen with my sister and BiL and thus hence the need for a written agreement/contract.

So does an agreement need to be properly drawn up by a solicitor or can an informal, home drawn up one be legally binding?

[Deleted User] · 14 May 2018 at 11:07PM

money + family = trouble

sourcrates · 14 May 2018 at 11:54PM

RiderOnTheStorm wrote: »

The loan has already been agreed with no detail. They are not seeking to gain interest from it. The brother in law is scheduled to receive an injury settlement at some point this year and the plan is for him to pay the full amount back out of it.

My parents just want to make sure they get there money back should the worse happen with my sister and BiL and thus hence the need for a written agreement/contract.

So does an agreement need to be properly drawn up by a solicitor or can an informal, home drawn up one be legally binding?

Normally Loan agreements have to be regulated by the consumer credit act and you must have a consumer credit licence to lend money.

What is the worst case scenario they envisage here ?

Private arrangements such as this are very difficult to prove if you need to use the courts to get your money back, and if it gets to that point the family will already be torn apart.

A piece of paper is as much use as an IOU to be honest.

Sncjw · 15 May 2018 at 7:00AM

Surely an agreement after the loan had happens won!!!8217;t look good in court.

tacpot12 · 15 May 2018 at 7:36AM

Surely an agreement after the loan had happens won!!!8217;t look good in court.

If the agreement is merely documenting the details and both parties are happy to agree that this is the purpose of the agreement, then there is no reason why it should not be signed after the principle has been paid.

I would advise documenting the loan and have all the parties sign the agreement.

System · 15 May 2018 at 12:25PM

You cannot retrospectively draw up a loan agreement. Without a loan agreement clearly stating out the date of the loan, the amount, the repayment terms, any interest charges (rate and total amount) and the date it must be repaid by, loans to family and friends are generally unenforceable because at the time they're taken there generally isn't an intention that the lender will take the borrower to court if they don't pay.

Even if you could draw up the agreement now, unless your parents would be willing to take other family members to court then there is no point having an agreement drawn up because ultimately such things are only enforceable via the courts.

Herzlos · 15 May 2018 at 12:47PM

RiderOnTheStorm wrote: »

The brother in law is scheduled to receive an injury settlement at some point this year and the plan is for him to pay the full amount back out of it.

Your parents should buy the car (if they need it right now) and allow your sister/brother in law to use it for free. Then the brother-in-law buys the car for them at the now price when the money comes in.

That way your parents own the car until it's been paid for and nothing can go wrong, beyond it being written off or they hide it and refuse to return it.

foxy-stoat · 15 May 2018 at 1:57PM

You could get them to write a Will leaving the car to your parents if they were both to pass away suddenly, if they are that concerned - but I suspect that will be the furthest thing from their minds if this were to happen.

Obviously if they were both to go together it may be in the car which will be totaled and the money will go to their Estate but if they have other debts they will need to be paid first and any assets can be given/paid to beneficiaries.

Legal or informal agreement on a family loan

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