Family car loan agreement

Lend the money, not the car

The structure that stays clean: you lend the money, the borrower buys the car, and the car is theirs — insured in their name, registered keeper on the V5C, their responsibility at the kerb. Arrangements where the lender stays “owner” while the borrower drives invite insurance muddles (including accidental fronting, which insurers treat as misrepresentation). The loan agreement can record the car’s purpose without owning it.

Why not secure it against the car?

Securing a personal loan on a car in England and Wales drags you into the Bills of Sale Acts — the Victorian regime behind “logbook loans”, with strict form and registration requirements that are easy to get fatally wrong. For family lending, an unsecured agreement with honest instalments is almost always the right instrument: simpler, valid, and it keeps the relationship — not the vehicle — as the real security.

Example: £7,500 for the commute

If a payment is ever missed, the agreement’s missed-payment rule — a short grace period, or the whole balance becoming callable — does the talking, so nobody else has to.

What the agreement should pin down

• The amount and the date the money moves — with a payment reference on the bank transfer so the advance is provable.
• The repayment plan — instalments or a single date, and what happens if a payment is missed.
• Interest, if any. There’s no statutory cap between family members; the builder warns (never blocks) at 25%+. Remember interest you receive is taxable income.
• Loan, not gift — stated in terms. It protects the borrower’s siblings, the lender’s estate planning, and everyone’s memory.
• Signatures from both sides — electronic signing is valid in England and Wales, and it’s how LendRight finishes the job.

If repayment stalls

Money claims start online wherever you live — through Money Claim Online or the County Court Money Claims Centre — and claims up to £10,000 usually go to the small claims track, built for people without solicitors. If an in-person hearing is ever needed, it’s listed at a county court hearing centre convenient to the defendant, wherever in England and Wales they live. In practice, a signed agreement plus a bank record is usually enough to make the conversation end long before a courtroom.

Under the Limitation Act 1980 you generally have six years from a missed due date to bring a claim on a simple contract — one more reason the agreement should set real dates.

Scotland and Northern Ireland — a different story

If either of you lives in Scotland or Northern Ireland, the builder will tell you honestly that we can’t serve you yet — those are separate legal systems, and a template written for England and Wales isn’t automatically right there. Everything about that decision is on our coverage page.