A written loan agreement protects both lender and borrower. Without one, recovering money lent to family or friends can be extremely difficult.

• Consumer Credit Act 1974 applies to regulated loans under £25,000 with interest
• Interest-free loans to family are generally exempt from FCA regulation
• Lending with interest without FCA authorisation may be illegal if regulated
• Loans between connected parties (family) should be documented to avoid HMRC issues
• Lender may need to declare interest received as income for tax purposes
• Security (e.g. a charge over property) requires separate legal documentation
• Guarantor arrangements require a separate guarantee deed
• Consider whether a gift, not a loan, better reflects the intention

Legal reference: Consumer Credit Act 1974; Late Payment of Commercial Debts Act 1998; Limitation Act 1980