Borrowing Or Lending Money

Whether borrowing or lending money, it is important that you understand there is risk involved. Our job is to highlight to you some of these risks, and where possible, provide options that may assist in minimising such risks.

If You Are Borrowing Money

If you are borrowing money it is important to understand what duties and obligations will be imposed on you under a loan agreement. Whether a loan is obtained from a friend or relative, bank, financial institution or credit provider, in the eyes of the law a loan contract will be in existence regardless of whether or not the agreement to borrow the monies is made verbally or in writing.

Important things that you should consider when provided with a loan contact are:

  • That such documents are often standard form contacts that usually unfairly favour the party lending the money;
  • There are strict obligations imposed on you under the loan contact over and above the repayment of
  • monies borrowed;
  • That often you will be required to provide security over an asset or a personal guarantee, thereby enhancing your exposure to risk;
  • Failure to comply with your duties and obligations under the loan contract can result in a liability greater than the amount of money being borrowed.

It is important when presented with a loan contract by any party you read and fully understand the terms and conditions thereof. It is also imperative that you read and fully understand the terms and conditions of any related mortgage agreement, guarantee, and/or related documentation. A mortgage agreement or a guarantee may be a document separate from the loan agreement but it is important to understand that the agreements are often linked, meaning a breach of one will constitute a breach of the other.

If You Are Lending Money

When lending money it is important to understand that you run the risk of not being repaid. For that reason it is important to minimise and address issues of such risk wherever possible. Risk can potentially be minimised by:

  • Documenting a loan agreement in writing and addressing all necessary issues;
  • Obtaining a mortgage, charge or other security over assets of the party borrowing the monies;
  • Having a third party guarantee the loan;
  • Performing background and credit checks on borrowers.

It is essential that any loan agreement, mortgage agreement and/or guarantee properly address all relevant issues and comply with any applicable consumer legislation. Failure to address the relevant issues and take into account any applicable consumer legislation can not only increase your exposure to risk but also result in penalties being imposed.

How We Can Help

If you are borrowing money we can assist by:

  • Explaining the meaning and effect of any loan document, mortgage and/or guarantee and providing an Advice Certificate if required;
  • Identifying potential areas of risk or concern and suggesting possible solutions;
  • Negotiating your loan agreement, mortgage and/or guarantee on your behalf.

If you are lending money then we can assist by:

  • Drafting loan, mortgage and/or guarantee documents on your behalf;
  • Identifying potential areas of risk or concern and suggesting possible solutions;
  • Helping with background checks and enquiries.

Please note that we cannot offer financial advice. We will work with your accountant and investment advisors/mortgage consultants to achieve the best for your needs.

For further information please contact: