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Loaning Money with interest....?

  • Thread starter Thread starter Assid
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Assid

hey all, i was thinking about different ways to make a little money on the side, and came up with the idea of loaning money.

i just have a normal everyday job paying minimum wage, but i have managed to save a little. the hours i work are very unpredictable and i know a lot of my colleagues are short for cash some weeks, but comfitable on others.

what i want to know is... am i allowed by law to loan money to them with interest? or is there some reason i cant do it?

ive got no previous experience in anything like this, so any information would be helpful, problems i may encounter etc. also, any help about writing up a contract would also be of big use to me.

thanks to everyone in advance.
 
I used to a very similar thing,

I loaned money for interest 200 - 2 k , stretching myself rather alot i actually had a fair bit of cash for an 18 year old but if you were to look into my bank account you never would have been able to tell.

What was good for me is i knew alot of people who had full time jobs and a love of the pub and other expensive hobbies so i used to lend them money at 30 or 40% over a month also people who i worked with,

So there was no problems getting it back and i was making a tidy sum,

But if you want to get into lending to strangers you need to abide to regulations and its inconvenient financially for your outlay and timewise,

What sort of figures are you talking?
 
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just small amounts, a lot of people i work with are in their early 20's, just moved out from their parents house etc... so when they need an extra £50 or so to cover that months rent, i want to be the one to profit from it. wasnt thinking of 40% interest or anything, was thinking more like 10%. i realise that means much less profit, but im not looking for something i have to spend a lot of time on. loaning money to a few people at a time at 10% will mean i can more-less forget about it until its time to collect. when ive saved up more money, thats when ill think about increasing the amount i loan out. at the moment i have around £1000 saved.
 
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Assid said:
just small amounts, a lot of people i work with are in their early 20's, just moved out from their parents house etc... so when they need an extra £50 or so to cover that months rent, i want to be the one to profit from it. wasnt thinking of 40% interest or anything, was thinking more like 10%. i realise that means much less profit, but im not looking for something i have to spend a lot of time on. loaning money to a few people at a time at 10% will mean i can more-less forget about it until its time to collect. when ive saved up more money, thats when ill think about increasing the amount i loan out. at the moment i have around £1000 saved.
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Well the way i always put it to people was i made out they were making life difficult for me, and that to lend them that money they had to make it worth my while,

I didnt feel guilty because most of the time they were wanting to buy stone island coats or gold or phones stuff they didnt need,

Just be careful i always lent to people who i was in contact with every week you dont have to chase people then,

I probably made about 5k in 2 years from it. Its a good earner if done right.
 
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so you never came across any problems? if i did loan money to somebody and they refused to pay me back... i wouldnt have a leg to stand on without some kind of contract right?
 
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Yeah but you can't keep gettin ya pals to sign a contract every time.

And if you go legal about it you will need to charge people more than 10%

Its risky to an extent, but it paid off in my case because i knew all the people i lent to really well.

I had one bad payer for £50 who i didnt kno that well, but overall i made a comfortable amount of money,
 
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In order to do this legally you would need a Consumer Credit Licence.

You would also need to be registered with the ICO.

I'm not experienced in the field of personal loans, (crewgirl is) but would suggest that a master agreement and schedule would be the best type of contract.

I'm sure you already appreciate that it all gets a bit messy when people decide not to pay....
 
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Yeah, maybe ill just stick to people i know and trust, and keep it off the books.

thanks guys
 
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Assid said:
Yeah, maybe ill just stick to people i know and trust, and keep it off the books.

thanks guys
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To go through an organisation like suggested would cost you 1k plus, ;-(

You would have nothing to lend then,.

good luck anyway.
 
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Searcher said:
If I were you then Zopa would be ideal as you get some protection from default, you choose who you want to lend to and you don't have to go door knocking to get your money back.
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Thanks :) looks like just the site im looking for, will give it a try...
 
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I run a training package to teach people how to do this.
If you lend money and charge interest without a licence even to friends, you really risk imprisonment, or at the very least a huge fine, and you would never be allowed to hold a licence for this type of activity in the future.
It is nothing to do with the information commissioner, this activity is licenced by the [urlno="http://www.oft.gov.uk/advice_and_resources/resource_base/credit-licence/"]Office of Fair Trading[/urlno]

If you want to know more about the training, see the link in my signature - Gina :)
 
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Of course, and that is exactly my point. If you want to just make a few pounds here and there Zopa is fine :)
 
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Yes it is, and a very unwise admission to make on an open forum. Ignorance of the law wouldn't be any defence either.
The OFT are cracking down really hard and have investigation teams out looking for unlicenced lenders.
 
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This thread is already at no 5, page 1 on google for: loaning money with interest.
 
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So anyone know wot kind of cost im looking at to get the licence to loan money out? all im trying to do is loan out like £100 here and there... ont wonna be spending too much on the licence to do it.

Edit: also, if i did get a licence to loan money, could i borrow money from my friend (at 0% interest obviousely, otherwise she would need a licence too) and then loan her money out to other people? with her permission.
 
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Atilla said:
Around £480
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Yes that is the application fee for a sole trader. If you manage to obtain a licence, then you will have to register under the AML (Anti Money Laundering regs), this costs £115.
 
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Assid said:
so 600, and then im free to start loaning?
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Well not quite, you have to have all your contracts designed and printed with the correct wording in the right order and format to comply with current legislation, then there are the default letters and payment books that have to comply too.
Oh yes, and you have to have some way of recording customer payment records, and the payment book that you leave with the customer has to comply too.
When you have looked through the application forms you might decide that you will need to pay someone to help with those as well. :) and some way of showing the OFT that you have a way of keeping up with current and future legislation.
 
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The problem is in my eyes, the bank strategies, no to lower the interest rates. The national bank already did, but i fear the customer wont get these fair interest rates. :(
 
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ok sorted, loaning to friends and family it is then lol

thanks for all the help everyone
 
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Not really a great idea when criminal proceedings could be the possible outcome. I think people who do this for family and 'friends' would almost inevitably become greedy and stretch the limits of 'friendship' to include more people. - Gina (I changed my name) :)
 
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This is going to end in tears (for someone). You want to become a loan shark..........nothing more nothing less and i am appaulled that people on here would advocate it.

As Gina said, you will become greedy and your circle of friends will increase. You might as well go the whole hog and go knocking on doors of houses of your nearest council estate.

Not everybody who wants to borrow money from a close friend or relative is living a champagne lifestyle on lemonade pockets. They may be people who are genuinly (through no fault of their own) struggling and you want to benefit from that.

Money lending legitamatly? Not a problem. But becoming a loan shark? NO WAY.
 
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I would imagine that Assid is floating face down in a canal by now. Been a couple of days since we have seen him and if he tried to put his plan into practice....

I despair of the youth of today.
 
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Zeno said:
I would imagine that Assid is floating face down in a canal by now. Been a couple of days since we have seen him and if he tried to put his plan into practice....

I despair of the youth of today.
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This thread has really, really wound me up!
 
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Zeno said:
Even if you ignore the legal aspects and the moral issues, you can't ignore the fact that this clown is stupid enough to think that he will be able to collect the money due.
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Yup agreed. Also can't help but feel he is preying and benefiting from other peoples misery.
 
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lucy*tenable said:
Yup agreed. Also can't help but feel he is preying and benefiting from other peoples misery.
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Thats life im afraid, it could be classed as slight loanshark im guilty of it myself,

But in effect you are lending to people not legally but on a handshake theres nothing wrong with that in my view.
 
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