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Clients: Family law

About the loan

    What can the loan be used for?

    The loan is regulated under the Consumer Credit Act 1974, and can be used to cover the costs of your case, including your solicitor's fees and any related disbursements (costs), such as barrister or forensic accountant costs. 

    You may decide to use Novitas for part of your costs and agree with your solicitor a different funding arrangement for the balance.

     

    How does the loan work?

    The loan is a pre-approved facility. The money is used as it is needed, with your approval, and paid directly to your solicitor to settle outstanding invoices and costs associated with your case. You do not have to use the entire loan amount and interest only accrues once the money is sent to your solicitor’s account. So, while funding is always available, you only pay for what is used

    You do not need to service the loan. The loan is repaid at the end of your case from your settlement.

    The loan contract is between you and Novitas. Your solicitor has an obligation to communicate to us any material facts that may affect repayment of the loan during your case and to pay off the loan from any proceeds received as part of your settlement. The remaining amount will be passed on to you.

    This is a fully recourse loan, which means that you, the borrower, are always responsible for repaying the money borrowed.

    How much does the loan cost?

    Our charges are transparent and straightforward. 

    The set-up fee is £500 (or 1% of the facility if the loan amount is above £50,000). This can be added to the loan or paid up front.

    Interest is accrued only on the money you use, and calculated at a fixed rate of 18% per annum or 1.5% per month (not compounded). It is due only when your case is complete and at loan settlement. We take the annual interest rate of 18% (1.5% per month), multiply by the amount you have used from your facility and divide by the number of days it has been drawn down. For example, if you use £10,000 for 6 months, you will pay back interest of £900.

    There is no minimum loan period, no early repayment charges, and no minimum interest charge.

    Independent legal advice is typically circa £300 (and cannot be added to your loan). This is required to ensure you fully understand all the implications of the loan arrangements.

    Representative example:

    Total Amount of Credit: £50,000
    Total Charge for Credit: £12,131, includes:

    • £300 Independent legal advice (estimate)
    • £612 setup fee (£500 set up fee plus £112 interest)
    • £11,219 loan interest (assumes full loan amount drawn down on day 1)

    Rate of interest 18% per annum (fixed)
    Duration 15 months

    Total Amount Payable £62,131
    Representative APR 19.5%
     

    How long do I have to repay the loan?

    We agree a time period for each loan, often based on an event such as the sale of a property or a settlement. While we put a time period of 12 months on the loan contract from the date of the agreement, we understand that this needs to be flexible and will roll on the loan on a 30-day basis according to your individual situation. 

    How much will you lend?

    The minimum amount we will lend is £10,000. The maximum amount depends on the specific circumstances of your case. Your solicitor will be able to provide an initial view on whether Novitas will approve the amount you require.

    In the case of a divorce, does my spouse need to know about the loan?

    Yes, but only once the loan is in place. There will be a letter that you sign and send to your spouse's solicitor explaining that you have assigned your portion of the proceeds of the divorce to Novitas to repay the loan, after which all proceeds will be returned to you. This letter is for their information only and they are not required to approve anything.

     

    How does the court view the loan?

    A Novitas loan can be treated as a formal loan by the courts who may consider it as a joint debt when evaluating your settlement. This is more beneficial than a soft loan from family or friends, which may not be recognised, resulting in an overall lower settlement amount.

     

    Is it in my solicitor’s interest for me to use a Novitas loan?

    Your solicitor is independent so receives no financial incentive from Novitas and cannot recommend us to you. Our loan service is a funding option available for you to consider, and only you can decide to proceed with a Novitas loan.
     

    Does every solicitor have access to the Novitas scheme?

    No. Our loan service is only available through approved firms. Check with your solicitor to see if they are approved; if they are not they can contact us about becoming an approved Novitas partner.  
     

    What happens if my solicitor is suspended from practice by the SRA during the term of the loan?

    You can cancel your loan facility which will require immediate repayment or transfer the loan facility to another solicitor.