Soft loans in divorce.

The term soft loans refers to informal loans made by family members or close friends on very flexible terms, often with no formal loan agreement, set repayment terms, or low or no interest rates. 

Soft loans are generally treated differently from other types of debts in divorce such as bank loans or credit card debts. Courts tend to exclude a soft loan as a marital debt, as these “loans” are unlikely to be repaid in the future, or have little likelihood of enforcement in the case of non-payment.

To increase the chances of a soft loan being recognised as a genuine debt, it is recommended to create a formal written loan agreement, with clear repayment terms and interest, and evidence of regular repayments.