Any lawyer types? Some loan advice if possible...
Liam - 19/8/08 at 09:04 PM
Hi there,
To cut a long story short, my partner and I are taking out a loan on behalf of a good friend as we can get a substantially better rate than he can
currently. There are no issues with affordability, trust etc etc but we all wish to be properly protected in the event of deaths and such like.
Wonder if anybody can give any advice on how best to go about that?
We were thinking of writing something like a promissory note to cover the loan amount, interest etc, but if i'm correct this does nothing to
cover the repayment of the loan in the events of his or our deaths. Is that part covered by him making a will with words to the effect of 'I
leave to liam and partner whatever sum remains outstanding on loan xxxx, and the rest to blah blah'?
I know this forum contains all knowledge, so hopefully someone out there can offer a few words of wisdom 
.
Cheers,
Liam
eznfrank - 19/8/08 at 10:00 PM
unfortunately i can't offer any advice for your original problem, however, as an experienced fraud investigator i can't see how you would be
able to apply for the loan without commiting fraud by false representation which is of course a criminal offence which can result in all sorts of
issues not to mention the effect it would have on your credit rating. The only way it would be a legal application is if you state the reason for the
loan is to help a friend out in which case i would have thought it would be a straight decline or alternatively if the bank doesn't ask the
question.
And i hate to say it but things do go wrong in friendships and also there must be a reason if banks won't give him the same rate as you?
Just my 2p worth.
Danozeman - 20/8/08 at 06:14 AM
As good a friend they are. Money changes people. If they end up skint and you have to ask for the money, itl end in tears. Its arkward asking a
good friend for money owed.
Just my 50p worth.
Bluemoon - 20/8/08 at 07:34 AM
I would not entertain that at all.. Perfect way to brake a friendship, if the loan company don't what to know that should say something to you
about the risk that your taking..
Dan
scootz - 20/8/08 at 07:40 AM
quote:
Originally posted by eznfrank
unfortunately i can't offer any advice for your original problem, however, as an experienced fraud investigator i can't see how you would be
able to apply for the loan without commiting fraud by false representation which is of course a criminal offence which can result in all sorts of
issues not to mention the effect it would have on your credit rating. The only way it would be a legal application is if you state the reason for the
loan is to help a friend out in which case i would have thought it would be a straight decline or alternatively if the bank doesn't ask the
question.
And i hate to say it but things do go wrong in friendships and also there must be a reason if banks won't give him the same rate as you?
Just my 2p worth.
+ 1
saigonij - 20/8/08 at 07:42 AM
really bad move - never lend friends money - money is the root of all evil.
how ever its not fraud. what you do with the money once you have it is your own business as long as you will be paying it off.
mistergrumpy - 20/8/08 at 07:48 AM
But it does sound like false representation. i.e. lying when asking for the money for one reason and then blatantly using it for summat else.
Watch Judge Judy tonight at 6pm on ITV2. Its full of people getting loans on others behalf then circumstances changing.
smart51 - 20/8/08 at 08:01 AM
Never lend money to a friend or family member that you are not willing to give to them. It is very hard to ask for it back. If you are willing to
give the outstanding load amount to your friend when things turn bad then good on you. We all need friends like that.
How much less is the loan repayment for you rather than for them? I would think it not that much compared with the risk.
eznfrank - 20/8/08 at 08:26 AM
quote:
Originally posted by saigonij
how ever its not fraud. what you do with the money once you have it is your own business as long as you will be paying it off.
Completely incorrect, a bank has the right to make whatever enquiries it sees fit into the risk associated with the loan. They are being defrauded of
the additional interest that the "friend" should be paying on what is the true risk.
It's much the same as lying on a CV or job application form. You may well be able to do the job perfectly but you're effectively conning
your way into that position.
Whether the loan is being paid is largely irrelevant as the correct repayment is not being made but it would be an aggravating factor if it was not.
David Jenkins - 20/8/08 at 11:32 AM
Probably the only legal way is for your friend to go for the loan, but for you to act as guarantor (i.e. financial backup) for the loan. This should
reduce his rate, if you're a better bet than he is.
HOWEVER - I wouldn't do it - as said above, it's a recipe for grief, future legal wrangles and loss of friendship.
mr henderson - 20/8/08 at 12:21 PM
quote:
Originally posted by eznfrank
quote:
Originally posted by saigonij
how ever its not fraud. what you do with the money once you have it is your own business as long as you will be paying it off.
Completely incorrect, a bank has the right to make whatever enquiries it sees fit into the risk associated with the loan. They are being defrauded of
the additional interest that the "friend" should be paying on what is the true risk.
It's much the same as lying on a CV or job application form. You may well be able to do the job perfectly but you're effectively conning
your way into that position.
Whether the loan is being paid is largely irrelevant as the correct repayment is not being made but it would be an aggravating factor if it was not.
Hardly. What a borrower does with money is no concern of the lender unless (as may happen with unsecured business loans) the lender has assessed the
intended use of the money as part of the risk (and interest) assessment.
The lender's concern is how likely the borrower is to repay the money. The borrower, in the case described by the OP, is not the destination of
the money, but it's the borrower who is responsible for repaying, not the third party.
People have been know to borrow money and actually give it away, so the lenders could hardly claim they'd lost interest on that, could they.
Having said all that, to borrow money on behalf of someone else is, or should be, de facto proof of insanity.
John
eznfrank - 20/8/08 at 01:04 PM
^^^ As someone who has worked for one of the biggest banks in the world for over 10 years and been a fraud investigator for the majority of that time,
I've never come across any kind of loan application (personal or business) that doesn't ask the purpose of the loan. In fact after
discussing this thread with some of my colleagues this morning someone quite rightly pointed out that even if the bank didn't ask for the purpose
of the loan then it would be a material fact that one would be expected to disclose anyway.
Any kind of misrepresentation of the true facts is an offence under the Fraud Act 2006 and was formerly obataining pecuniary advantage by deception
under the theft act.
And I'm not trying to judge anyone else on their thoughts on this matter however, what I have said previous is FACT, and is not purely my
opinion. Unfortunately it's the law! What I'm trying to do here is highlight to this guy the potential pitfalls of what he's doing
and people who try advise him otherwise are doing him no favours.
Sorry if that sounds like a bit of a rant but my profession is constantly the plague of "bar room" lawyers and investigators who give people
poor advice which ends up making the situation worse.
owelly - 20/8/08 at 01:18 PM
So what if Liam borrowed £xxx to buy a car, he then gave the car to his mate who then sold it for £xxx? The money would have been used to buy the car
as declared in the paperwork. But then the car would have been gifted to his mate who sold it!!
As for lending to a mate; I've lent a mate cash and he did a runner. I asked him for it back and he turned-up with his new mates and wrecked my
car and my house!!! On the other hand, a mate was driving my car and he was third party only. He bumped a Jag and wrecked my car. He took out a loan
to fix my car even though I was happy to drive it with a mashed-up side! There are some good friends around.
eznfrank - 20/8/08 at 01:24 PM
^^^ A tricky one. He would still be commiting an offence as it was his intention all along, however, that would be almost impossible to prove and
would be a bit of a non-starter for an investigator.
That been said, on paper it would look very much like money laundering which could (although probably wouldn't) lead to lots of digging around by
financial investigators
mr henderson - 20/8/08 at 01:44 PM
quote:
Originally posted by eznfrank
I've never come across any kind of loan application (personal or business) that doesn't ask the purpose of the loan.
Hmm, not my experience. Business loans, yes they do ask, but personal loans they haven't (this would be the Halifax, btw)
Your mileage might vary
John
saigonij - 20/8/08 at 02:11 PM
actually, i realised that i have no basis in which to make a comment - only my opinion, so i have deleted my previous comments.
[Edited on 20/8/08 by saigonij]
eznfrank - 20/8/08 at 02:57 PM
quote:
Originally posted by saigonij
but in terms of what the money is for, i cant see that being fraud...
Maybe it sounds daft but that's the law I'm afraid. Any information on the application form that is false which "could" alter a
banks decision to lend or at what rate is fraud. In much the same way that lying on a CV is fraud, like it or not.
Banks have to apply a certain amount of discretion and as you say buying a van instead of a car or a CD player instead of an LP player would be
reasonable but giving the ££ to a friend is vastly different to for example saying you want to have a new kitchen.
The bank wouldn't just investigate it for no good reason but that doesn't make it legal.
mr henderson - 20/8/08 at 03:58 PM
quote:
Originally posted by Liam
but if i'm correct this does nothing to cover the repayment of the loan in the events of his or our deaths. Is that part covered by him making a
will with words to the effect of 'I leave to liam and partner whatever sum remains outstanding on loan xxxx, and the rest to blah blah'?
He doesn't need to say anything in his will as his estate will still owe you the money. If he dies before repaying the loan you would need to get
in touch with his executors and asked to be paid from the estate. As long as there is enough money you will be Ok, if there isn't then you
won't be.
You will need to be able to show that the loan is valid and what you have and haven't received by way of repayment.
John
Liam - 20/8/08 at 04:35 PM
Blimey that caused some debate! It's unanimous that I'm insane. You cynical bunch. Nah - seriously I appreciate that such advice will
often be from experience and I take it on board wholeheartedly. In any case I've pretty much gone off the idea on the strength of
eznfrank's advice and probably wont bother (though what I said the money would be used for would actually be true technically)!
My dad has worked for 'a major bank' for 30 years so we know the formulas used to process these applications. Without wanting to discuss
anybody's financial details the situation is just that my friend currently would score badly on these criteria for a number of factors and is
being met with 'computer says no' accross the board, apart from one comedy offer at a rate much worse than his credit cards. Silly
considering he's a PHD on a good salary with no dependancies! In about six months time these factors will have changed and 'computer will
say yes', so really we were thinking of stepping in until then.
Ah well looks like he may just have to be shafted until he can get another loan at a decent rate! I take on board the advice that i shouldn't
risk it becomming my problem.
Cheers - an interesting response!
Liam
[Edited on 20/8/08 by Liam]