About the loan
How does the loan work?
The loan contract is between Novitas and your client.
The money is drawn down from the loan facility as it is needed and paid directly to your client account to pay outstanding invoices for your fees and disbursements associated with the case. Your client does not have to use the entire loan amount and interest only accrues once the money is sent to your client account.
There is nothing for the client to pay until the case concludes as interest is rolled up on a simple basis i.e. there is no compounding of interest. The client instructs your firm to repay the funding from the proceeds of the settlement.
You will have a dedicated online portal to administer the facility, where you can make new applications, make drawdown requests, and monitor the status of any applications or drawdown requests.
The scheme is only available to clients of approved firms, and Novitas will consider each case individually.
This is a fully recourse loan and the client is always responsible for repayment of the loan. If the loan is not repaid by the client, Novitas or the insurer may ultimately take legal action to recover the loan monies.
How much does the loan cost?
There is no minimum loan period, no early repayment charges and no minimum interest charge.
Our charges are straight forward and transparent
- 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 fixed at 18% per annum or 1.5% per month and calculated on a simple basis, i.e. there is no compounding of interest. Interest only accrues on money drawn down from the loan facility. The loan does not require servicing, which means that the loan funds and the interest can all be paid at the end of the loan. This helps all clients with cash-flow concerns and particularly those with little or no income.
- Interest is calculated by taking the annual interest rate of 18% (1.5% per month), multiplying by the amount used and dividing by the number of days it has been drawn down. For example, if the client has drawn down £10,000 for 6 months, they will pay £900 of interest in addition to repaying the £10,000.
- We ask the client to take independent legal advice on the loan documentation, which is typically circa £300 (and cannot be added to the loan).
If the client does not have sufficient security by way of assets in their own name, they may be required to take out insurance provided by Novitas. The insurance premium is 10% plus Insurance Premium Tax of 1.2% (as at 3rd December 2017) of the amount that is drawn down and will be added to the loan. Please note that this insurance does not insure the client against failure to repay the loan.
What is the duration of 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 may 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 client's individual situation.
In a divorce case, does the client's spouse need to know about the loan?
Yes, but only once the loan is in place. There is a letter the client signs and sends to their spouse's solicitor once the loan is in place saying that they have assigned the proceeds of the divorce to Novitas to repay the loan, after which all proceeds are returned to the client. The loan is paid off using the client's portion of the settlement.
Once approved, is there a time limit for the first drawdown to be requested?
The first drawdown will need to be requested within one year after the cooling off period has been completed. If after two months the Novitas loan has not been used, we will carry out a further credit check.