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Hi - I'm new to this excellent site and have posted a question relation to money lent to a friend on a different forum - probably the wrong one! I know duplicate posting is not usually accepted so I am asking another simple question here.
I have given a personal loan - £55,000 secured on his house - to a very good friend who had a bad divorce and injury as a stuntman that left him with a very large business loan. This agreement was for 6.5% but at the last moment his solicitor added a clause to change to 1.5 % over base rate - and if the loan was not redeemed after two years the agreement would continue under the same terms. This seemed reasonable, but within 9 months the rate had dropped to 0.5%. Neither he nor I remembered the 1.5% over base rate deal so I did not advise him of a reduction of interest due, nor did he offer to pay less each month. I was also living abroad and not tuned in to base rate changes. Several months he has failed to pay anything - but has advised each time that he could not afford to pay. When he did resume payments he never reduced the payments because the interest rate had reduced, nor did he advise that the interest rate had fallen or if the excess could pay of the principal balance. (He failed to pay 45 months out of 118 - yes I have been a very good friend to him). He paid by Standing order and calculated the initial interest rate himself.
Now 9 years later his accountant is claiming he should have been paying at 2% since 2009, not 6.5%!
The clear problem is that if I we had both agreed a reduction of his monthly payments when the interest rate fell then at the end of the first two year loan agreement I would have redeemed the loan - but I would have continued it with a rate of 5%. I have offered this to him but he hasn't communicated for three weeks and is still talking to his solicitor. I have now officially terminated the loan and will continue at a rate that I decide on. He doesn't think I can do that!
How do I resolve this issue without going to court? Mediation would be good if he would talk to me.
I have given a personal loan - £55,000 secured on his house - to a very good friend who had a bad divorce and injury as a stuntman that left him with a very large business loan. This agreement was for 6.5% but at the last moment his solicitor added a clause to change to 1.5 % over base rate - and if the loan was not redeemed after two years the agreement would continue under the same terms. This seemed reasonable, but within 9 months the rate had dropped to 0.5%. Neither he nor I remembered the 1.5% over base rate deal so I did not advise him of a reduction of interest due, nor did he offer to pay less each month. I was also living abroad and not tuned in to base rate changes. Several months he has failed to pay anything - but has advised each time that he could not afford to pay. When he did resume payments he never reduced the payments because the interest rate had reduced, nor did he advise that the interest rate had fallen or if the excess could pay of the principal balance. (He failed to pay 45 months out of 118 - yes I have been a very good friend to him). He paid by Standing order and calculated the initial interest rate himself.
Now 9 years later his accountant is claiming he should have been paying at 2% since 2009, not 6.5%!
The clear problem is that if I we had both agreed a reduction of his monthly payments when the interest rate fell then at the end of the first two year loan agreement I would have redeemed the loan - but I would have continued it with a rate of 5%. I have offered this to him but he hasn't communicated for three weeks and is still talking to his solicitor. I have now officially terminated the loan and will continue at a rate that I decide on. He doesn't think I can do that!
How do I resolve this issue without going to court? Mediation would be good if he would talk to me.
