Loan between private individuals under Irish Law

share_bear

Query on legal situation under Irish Law on money lending between private individuals.

Suppose Mr J.Soap wants to lend a sum of money to Mr & Mrs Bloggs, both are acting as private unrelated parties. It is a once off transaction, not a money lending business.

Suppose also that the parties want to keep the transaction confidential and don't want to, say, register a debt/charge somewhere for legitimate reasons (i.e NOT tax evasion etc before anyone kicks off). For example, a government-style off-balance-sheet loan to be a deposit for a house or something like that.

Is it possible for such parties to enter into a secure relationship that is enforceable under Irish law? Or do you have to be a licensed moneylender to achieve that?

the world wonders

share_bear wrote: »

For example, a government-style off-balance-sheet loan to be a deposit for a house or something like that.

I would imagine that the mortgage application form would ask you to list any and all outstanding loans you have, and if you didn't complete it truthfully you would be guilty of fraud.

Not to mention that the creditor would have to a bit naive to lend a large unsecured sum to someone who has already shown that they have no scruples about telling lies to get loans.

The loan itself should be enforceable in the usual way -- moneylending licensing and regulations seem to apply only to "a person who carries on the business of moneylending, or who advertises or announces himself or holds himself out in any way as carrying on that business".

share_bear

the world wonders wrote: »

I would imagine that the mortgage application form would ask you to list any and all outstanding loans you have, and if you didn't complete it truthfully you would be guilty of fraud.

Not to mention that the creditor would have to a bit naive to lend a large unsecured sum to someone who has already shown that they have no scruples about telling lies to get loans.

The loan itself should be enforceable in the usual way.

Well suppose Vendors lends to purchaser, and purchasers then immediately pays vendor an non-refundable deposit on the property (which satisfies the loan). Perhaps no cash actually changes hands, just on paper by agreements. Now the purchaser has a receipt from the Vendor to say a deposit has been paid, and the purchaser can at that point honestly say he does not have a loan.

What do you think?

Would a bank accept the receipt at face value or want to trace the cashflow?

I imagine people had to have cash on the hip ready to grab properties at the height of the boom when demand was high...

the world wonders

share_bear wrote: »

Well suppose Vendors lends to purchaser, and purchasers then immediately pays vendor an non-refundable deposit on the property (which satisfies the loan).

No it doesn't satisfy the loan, it satisfies the deposit. The same money can not be both a loan repayment and a deposit on the house. I can't lodge €1k to my current account and say to the bank, "there you go, that's my €1k mortgage payment and my €1k credit card bill".

Anyway, so is this is how your proposal works?:

• house is worth €100k
• vendor and purchaser conspire to create an inflated valuation of €120k for the bank
• purchaser tells bank that they have paid a deposit of €20k and have no outstanding loans (it is not possible for both of these statements to be true)
• bank loans out €100k, thinking they are loaning only 83.3% of the value of the house, when they are actually lending 100%

Fraud on the bank, civil and criminal penalties apply.

Peregrinus

share_bear wrote: »

Query on legal situation under Irish Law on money lending between private individuals.

Suppose Mr J.Soap wants to lend a sum of money to Mr & Mrs Bloggs, both are acting as private unrelated parties. It is a once off transaction, not a money lending business.

Suppose also that the parties want to keep the transaction confidential and don't want to, say, register a debt/charge somewhere for legitimate reasons (i.e NOT tax evasion etc before anyone kicks off). For example, a government-style off-balance-sheet loan to be a deposit for a house or something like that.

Is it possible for such parties to enter into a secure relationship that is enforceable under Irish law? Or do you have to be a licensed moneylender to achieve that?

Perfectly possible - depending on what you mean by "secure".

I can lend you a stated amount. We can agree that you will pay interest at such and such a rate, and that you will repay the loan by such and such a date. We can (and would be wise to) put that in writing. We do not have to register this with any government agency, or tell any third party about it. It is legal, valid and enforceable.

But I have no security. I don't have a mortgage or charge of any kind. I only have your personal covenant to pay. I can sue you, and I can get judgment against you, but I'm an unsecured creditor, ranking equally with all your other unsecured creditors. If you also get a loan from a bank, say, and secure that with a mortgage, the bank will be paid out of the mortgaged property before I get anything - even though I extended my loan first.

So my loan may or may not be secure, but it's not secured.

The second point others have already touched on. We don't have to register the loan or anything like that, but if the borrower later goes on to borrow from others, and in that context he conceals or lies about his debt to me, he is committing fraud. And, depending on the circumstances, I may be a party to the fraud.

pablo128

About 6 months ago, I went to enquire about a mortgage to my bank. Basically, I could accept a no strings attached gift from my brother for the deposit. He would have to sign something to say he had no claim or ownership of the property. I would have to satisfy the bank as to my ability to repay the loan, as in amount of earnings, amount of outgoings etc, and would have to be saving an amount similar or in excess of the proposed monthly mortgage for about 6 months.

Hope that helps.