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This Letter to Lender Confirming Gift or Loan can be used when one party (A) has provided money to another party (B), and B is also seeking a loan from a bank or other lender.
For example, it is often used when parents have given money to a child, to enable the child to purchase a house. The child may then go to a bank to seek a loan, and the bank may ask for confirmation of whether the money from the parents was a loan (which needs to be repaid in future) or a gift (which will not need to be repaid). In many cases, if the money from the parents was a gift, the child may be more likely to be approved for a loan, and may be able to borrow more money from the lender.
This letter can be used in either case (whether the money is a gift or a loan). It can also be used to provide further details about the money, for example any applicable interest rate (if it was a loan), and the purpose for which it was provided.
How to use this document
As with any legal documents, it is important to provide clear and accurate information when preparing this letter. Since a bank may rely on the information contained in this document to decide whether or not to provide a loan, there may be serious penalties if any misleading or deceptive information is provided to the bank or lender.
Once the document has been prepared and signed by the Sender, it may be provided to the bank or lender.
Both the Sender of the letter, and the person to whom they are providing money, may keep a copy of the document for reference.
There are no laws in particular that apply to a Letter to Lender Confirming Gift or Loan. However, the National Consumer Credit Protection Act 2009 (Cth), and in particular the National Credit Code, which appears in schedule 1 of that Act, deals with consumer credit in Australia.
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