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Equine Loan Agreement

Horses can be extremely expensive to buy, and a loan is often necessary. Knowing what you're doing when seeking to borrow money for a horse purchase is of the utmost importance.

Buying a horse is a big commitment, and even transactions involving small and relatively inexpensive horses can cost thousands of pounds. People who are thinking about buying a horse may find that they have difficulty obtaining the purchase monies from traditional sources such as a bank and business loans and so it may be necessary to look for an alternative source of finance, such as private loans.

Because of the large sums of money involved, it is advisable to take legal advice from a solicitor before granting or accepting a private loan to finance the purchase of a horse. A lawyer who specialises in the field of equine finance can appraise your situation and offer objective advice on the type of financing arrangement which best meets your requirements and means. There are a number of issues which will need to be considered before agreeing a finance package, for example, will the loan be secured or unsecured?

The loan can be secured against any form of collateral, and this may take effect as a legal or equitable mortgage or a legal charge over the horse itself or some other property. Alternatively, the finance package can be structured so that the lender obtains rights over a portion of the equity in the horse. This may be an equity share agreement in which the lender becomes a part owner in the horse and the borrower can purchase this share from the owner, or the agreement may be structured as a hire-purchase or buy-back loan where the lender becomes the owner of the horse, but the borrower is able to incrementally increase his own ownership by making additional.

It is important that there is a clear and unambiguous loan agreement setting out the respective rights and obligations of the lender and the borrower, and covering issues such as debt collection, payment frequency, interest rates, ownership and risk in the horse, and what happens if the borrower falls into default. Because of the sums involved, even minor errors or loopholes in the contract could prove extremely costly to either party, and so the expense of having a solicitor draw up or check over the paperwork is often money well spent.