Lending money to a friend

A question about : Lending money to a friend

Hi
I have been asked by my uncle to draw up an agreement for him as he wants to get a loan out to lend Ј3000 to a friend so the friend can buy a Ј5000 caravan. (The friend is putting up the other Ј2000). The friend will be paying the monthly installments to my uncle who will then pass this to the loan company to meet the monthly repayments. They have both agreed that should the friend miss one monthly payment then the caravan will be transferred into my uncles name for him to either keep or sell and they both want this putting in the agreement. I would like to know if this is legal/enforceable should a payment be missed and if the friend then decides not to keep to the agreement and not transfer the caravan to my uncle. I can foresee that this will be the case, especially if they have paid off the bulk of the loan before missing a payment. Any advice would be greatly appreciated as we have all advised our uncle not to do this but he really wants to help his friend.
Thanks in advance!

Best answers:

• It is a really stupid idea.
  But if he is determined, then he should buy the caravan in his name and only transfer ownership to the friend when the last instalment is paid.
  That would be a slightly less stupid way of doing it.
• If your uncle had far bit in savings and wanted to lend his friend 3k that would be one thing but to take out a loan shows he can't have much money himself. Utterly stupid idea.
• absolutely stupid idea
• Has anyone suggested this is a stupid idea?
• OP Dont do this, NO REALLY dont do this.
  Its a really REALLY stupid idea, and sounds like its a scam rather than a favour that will go wrong!
• Don't do it.
  I gave family money despite everyone telling me i shouldn't do it. It was a lot more than a few thousand pounds that i've lost, i almost lost my house. And all because while others were warning me i kept saying i trusted them 100%.
  If i could only go back 9yrs.
• Your uncle should only do this if he is easily able and willing to stand the loss. There is a reason why his 'friend' can't get a loan in his/her own name. Think about it.
• What if the friend cant pay the instalment.
  Yes, you say the caravan will be transferred over ot your uncle but what if Ј4K is owed on the loan and the caravan only attracts a sale of Ј2K....
  Mad, utter madness.
• Should you do this?
  Short answer: "No".
  Long answer: "Noooooooooooooooooooooooooo!!!!!!!!!!!"
• This agreement is made between me the uncle, herein after referred to as "the silly old fool" and me the friend, herein after referred to as " the sweet talking old ****"
  I the uncle being 100% trusting of my friend shall borrow in my own name the sum of Ј3,000 and hand the cash over to my dear friend.
  I the friend shall take he Ј3,000 from the silly old fool and purchase a caravan for Ј3,000 which the dealer shall furnish a receipt of Ј5,000 for me to show the silly old fool that I have indeed added the promised Ј2,000 to the transaction.
  I, the friend, have worked hard at my credit rating, so hard in fact that lenders are not willing to afford me a loan and keep referring to me about barge poles which I do not understand. Any way I promise to pay money to the silly old fool to cover his loan. I will do this until something more important crops up. In this case I really will, fingers are crossed, pass the caravan to the silly old fool. Honest I will.
• And seriously, 5000 for a caravan - can't stand the things personally but it's obviously a want, not a need - could see the point of a car (though would say get a Ј2000 car) but something purely for leisure is a joke - why not just save the Ј2000 and stay in caravans you can rent - borrowing to spend on an unnecessary luxury is madness
• apart from it being a really really stupid idea a caravan for Ј5000 will be little better than a skip on wheels
• What a brilliant idea!
  When 'friend' treats your uncle the same as he has evidently treated everyone else who has lent him money (explanation above about credit rating..) then there will be a certain amount of unpleasantness, guaranteed. At the end the two will hate each other, and your uncle will be well rid of an exploiter posing as a friend. An out come well worth a few thousand...
• Tell you one thing OP, why not insist that YOU buy the caravan in YOUR name, and transfer ownership when your "friend" has paid the whole loan off? On the condition that if he misses a single payment he loses the caravan.
  Not that I would recommend this in 1000 years, but if I were doing it I would have the asset completely in my name. I bet if you put that to your "friend" he wont be so keen to go ahead and part with his Ј2000!!