What To Do?

[Sqad]

Local shop wanted a short term loan of €20,000 for one year and the bank agreed but wanted 6% interest.
I stepped in and an agreement was made, signed by all parties that I would lend them €20, 000 to be pain on the 1st January 2017 with the interest of €1,000 to be pain in cash.
So far so good.
They have now come into a "windfall" and want to pay the whole sum back NOW, some 6 months before it is due.

Fine.

I want the interest of €1,000 in cash.......not interested in the capital being repaid now.

If they repay the capital sum early can i reasonably demand the full interest i.e €1,000 in cash?

[Old_Geezer]

In the shopkeeper's shoes, were I to pay the anticipated full term interest 6 months in advance I couldn't see any benefit in doing so. I'd lose the use of that money for 6 months without any benefit. May as well keep it the full term and invest it, after all it would be the equivalent of a free 6 month loan since the full anticipated interest seems to be a sunk cost.

Legally I don't know the position, but loans to friends make standing on the legal position a lose lose situation as far as relationships are concerned.

I can not imaging a bank's early repayment charge (even if they had one - my mortgage loan didn't) would be the full cost.

Personally I'd be glad to have been able to help out and view it as I'm owed one should I need a favour in the future. Not that I'd expect them to deny me any reasonable request anyway (but the local shopkeeper may not like the way you look at his wife ;-) ). But if you really do feel something is due,negotiate. Ask what he is suggesting to end the arrangement and if it is half the anticipated interest only say that you are disappointed that you aren't getting the full agreed interest if he pays off now and what about an offer of x% on top as compensation. Although put it in a nicer way.

Remember that once the money is back with you, you can still invest it elsewhere for your benefit.

[Sqad]

^^^..LOL.....O_G

Thank you ALL.

[bednobs]

i don't really understand why the banks offer wsn't taken up - after all they'd only be paying £200 more interest over the term (or is my maths wrong?) so much can go wrong with loans to friends. Anyway, i would expect the 1000 but take 500 now. After all who knows if they'll still be in business in 6 months time?

[Sqad]

bednobs....I am certainly gong to take the €20,000 now, the question is...........how much interest should i expect.

[ummmm]

All of it, Sqad. 1k is a small price to pay for being bailed out.

[KARL]

It seems the contract demands a repayment of €21,000 regardless of when repayment takes place, the only question being whether early repayment would constitute a breach of contract (in my view unlikely to be upheld in a court). Presumably no decision has yet been entered into over the the issue of the €1000 so it is perhaps time to raise it tactfully: What is the borrower's view. The moral dilemma versus financial business transactions is there: Just because, in the fullness of time, the lender expected a gain, what does he lose if he gets his capital back early without the full gain being realised ? He has the capital back and can again put it to whatever use he sees fit. Is insisting on more than the proportionate gain (actual versus contract) reasonable/wise, whether in terms of the original "interest" or a "fee/charge" to replace it ?

[237SJ]

I wouldn`t fall out with them over the interest. After all, what`s 500 quid? you can`t take it with you. And you didn`t factor in an early redemption penalty so I would think it`s a case of Gentlemens` Honour.

[Sqad]

Thanks again folks.

[shoota]

E500 isn't even £400, *** all to an international financier playboy like yourself.
Take what they offer and have a friend for life.