Question 1

What is the highest interest that can be charged?

Accepted Answer

Interest rates can be up to 1% above the Bank of England (BoE) base rate. However, if the interest is more than 1% higher, then the agreement becomes a commercial agreement and needs additional clauses that are in line with the Consumer Credit Act.    Late payments may be subject to a maximum interest rate of up to 4% above BoE base rate.     In November 2022 the base rate was 3%, the highest rate was 4% on a personal loan and 7% on a late repayment.

Question 2

Can I buy a loan agreement template

Accepted Answer

Parachute Law does not offer a loan agreement template service at this time. Our fixed fee covers the drafting of your agreement by a professional solicitor.

Question 3

How many lenders can you have in the loan contract?

Accepted Answer

Issues can arise when there is more than one lender named in the loan agreement because the party's intentions for repayment may differ.    We will only draft a loan agreement with more than one lender if the lenders are married or civil partners because their intentions are aligned. If the relationship between the lenders is anything else then we will draft two separate loan agreements to suit the intentions of each individual lender.

Question 4

Can a loan be registered against the borrower's property?

Accepted Answer

A loan contract is often registered over an asset like an house as security to ensure the loan is settled upon the sale, however not all loans are registered over property. Some relationships, such as family, choose a higher risk but more informal approach to the loan and don't register it.    We can help register the agreement for an additional charge of &pound;260. The process is as follows:     1 (if you have a mortgage) You need to obtain lender consent to the second charge being registered at the property. There is no point paying to register the loan if the lender won't allow a second charge. Your mortgage broker can help chase this.   2 Loan contract is signed by borrower and lender and the original signed document is sent to Parachute Law in the post by recorded delivery.   3 (if you have a mortgage) We contact your lender and obtain written consent to register a second charge. This can take upward of 10 working days to obtain consent from the lender.    4 Land Registry forms are completed and submitted.

Question 5

What happens if you don't register the loan and the loan isn't repaid?

Accepted Answer

The loan is still repayable so the lenders can use the agreement to enforce repayment of the loan through the courts. The end result being that if the loan is never repaid that the lender could file for bankruptcy proceedings against the borrower.    It is however safer for all parties to register the loan contract over the property regardless of the relationship to avoid any dispute in the future or failure to pay.

Question 6

Do we verify ID?

Accepted Answer

The loan contract is drafted for both the borrower and the lender, however we will only act for one side; either the borrower or the lender.     We will verify the ID for whomever our client is, either the borrower or lender, and the other party should instruct a solicitor to act for them to provide independent legal advice regarding the terms of the agreement.

Question 7

Do we verify source of funds?

Accepted Answer

We do not operate a client account so do not receive the loan from you. We are only instructed to draft the agreement in accordance with your intentions and, if instructed to do so, register the agreement against the property.    We do not offer the service to verify the source of the funds for a loan nor can we receive the loan to send onto a conveyancer.    In cases where there is a conveyancer acting for a buyer then they will receive the loan either direct from you or from the borrower to their client account. The conveyancer should satisfy their own money laundering enquiries for the source of the money they are receiving. This should not be deferred to a third party solicitor.    The conveyancer should obtain satisfactory proof of the source of the loan directly from the lender.

Question 8

How do you sign a loan agreement?

Accepted Answer

The lender and the borrower both sign the loan contract. After this the lender sends the borrower the loan funds, either directly to them or to their conveyancer.    The agreement only requires a witness signature if the lender isn't charging any interest. If there is interest being paid, or any other consideration on top of the loan amount then the agreement does not need a witness signature.

Question 9

How do I remove the charge once the loan has been paid?

Accepted Answer

If the loan is secured on a property, a charge will be applied to the title at the land registry. The charge will prevent the Borrower from registering a disposition of the property, without the consent of the Lender. Once the loan is paid off, the lender will need to complete a DS1 form and submit it to the land registry, to remove the charge.

How can we help?

Loan Agreement

Standard loan agreement or bespoke drafting?

Do I need a personal loan agreement between friends?

How can we help?

Loan Agreement

Standard loan agreement or bespoke drafting?

Do I need a personal loan agreement between friends?

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