Borrowing money is a part of everyday life in the UK. Personal loans are common from banks to credit unions, and even informal loans between friends or relatives. However, problems can arise when one side doesn’t stick to the terms. Disagreements often come down to how the loan was agreed upon, especially when there’s no written contract.
A personal loan dispute usually involves missed payments, disagreements over interest, or unclear repayment terms. These situations can quickly become stressful for both the lender and the borrower, particularly when the expectations weren’t properly set out at the start. That’s why it’s important to understand your legal options.
Why Loan Agreements Matter
A loan agreement breach can happen for many reasons – missed repayments, changing terms without consent, or failure to meet conditions set out at the beginning. Even if the loan is between friends or family, it can still be legally binding.
A formal written agreement provides clarity. It usually includes details such as how much was borrowed, when and how repayments are due, interest rates (if any), and what happens if something goes wrong. Things become more complicated when this isn’t in writing, but that doesn’t mean it’s unenforceable.
What If the Agreement Was Verbal?
UK courts recognise a verbal loan agreement, but proving its terms is often hard. Your case may rely on other evidence if you lent or borrowed money based on a conversation. This could include text messages, emails, bank transfers, or even statements from witnesses who were aware of the loan.
The absence of a written contract doesn’t mean you’re out of options. Gathering as much supporting material as possible is essential. A solicitor can help you assess the strength of your case and decide on the next steps. You might start by trying to settle directly or through mediation before going to court.
Taking Legal Action
When a loan agreement breach cannot be settled informally, legal action might be the only route. The person bringing the claim must prove that the loan existed and was breached. This is where your evidence becomes key. Courts will want to see that money was lent and that a clear agreement was made on repayment.
In some cases, the Consumer Credit Act 1974 may apply, particularly if the loan was from a regulated lender. This law protects borrowers and obligates the lender to provide clear terms. If these rules were not followed, the agreement might be unenforceable.
The general rules of contract law apply for loans that fall outside regulated lending, such as between individuals or businesses. A court will look at the intention of both parties, what was agreed upon, and how that agreement was acted on.
What Borrowers Can Do
If you’re on the receiving end of a personal loan dispute and struggling to repay the loan, it’s better to act early. Speak with the lender, explain your situation, and try to agree on new terms. Ignoring the issue can lead to legal action and added costs.
In more serious cases, options such as debt management plans or even insolvency procedures, might come into play. Always seek legal advice before making major decisions, especially if personal guarantees are involved, as your assets could be at risk.
Final Thoughts
Disputes over personal loans are often avoidable with clear communication and proper documentation. However, understanding your rights and obligations under UK law can help you take the right steps when things go wrong.
If you’re dealing with a personal loan dispute, it’s important to act quickly. Don’t rely on assumptions—get advice and gather your evidence. Whether the issue involves a written or verbal loan agreement, there are legal options available to resolve it fairly.
