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What’s the difference between gifting and lending money?

Disputes often arise as a result of sums of money being either gifted or lent to family members or friends. ‘Gifting’ money is exactly that – a gift. The money is given on the understanding that it does not need to be repaid. However, if money is lent to another party, it is given on the condition that it is paid back with or without interest (and possibly also within a specific time frame).

Typically, a sum of money may be gifted or lent to a friend or family member in the following scenarios:

  • Towards the deposit for a house purchase
  • To pay off student debt
  • To make a large, one-off payment (eg car purchase)
  • To fund an unexpected bill (eg boiler repairs or replacement)
  • Towards the cost of a wedding
  • To help with home renovations and improvements
  • To finance Christmas or birthdays

Disputes can arise if it becomes unclear whether a sum of money was intended to be a gift or a loan.

For example, a parent may have a beneficial interest in their son or daughter’s property if the money given towards a deposit was intended to be a loan rather than a gift. Under these circumstances, you may wish to consider making a Declaration of Trust to clarify the conditions of the loan.

It’s also worth bearing in mind that before a mortgage lender accepts a deposit contribution from a party other than the buyer(s), they will generally require a signed gifted deposit declaration letter. This document confirms the gift giver does not have an interest in the property nor expects to be repaid.

If you’re planning to make a gift or loan, it is always advisable to take appropriate legal advice beforehand. Putting an agreement in writing together with the signatures of all parties involved can help avoid disputes in the future.

To speak to our expert team about making a gift or loan or resolving a dispute, please call 0113 232 1030 or email

Gurpreet Birdi

Written by

Gurpreet Birdi

Associate Director

Gurpreet is an Associate Director. She is a solicitor in our Dispute Resolution team with significant expertise in civil and commercial disputes. She specialises in contested wills and probate, financial service litigation and professional negligence.

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