Private borrowing is borrowing money from family and acquaintances. Due to the current economic crisis, it is more common than in the past to borrow from acquaintances or family. The reason for this is very simple: there is often a lower (or no) interest to pay. Figures from our Northern neighbors even show that no less than 9 percent of Dutch households have a debt with friends, family or acquaintances. That is a doubling in no less than 3 years. In Belgium – as is often the case – no figures are known about this so far.
However, it is not recommended to borrow or borrow from friends or relatives. It is often forgotten that financial complications can lead to quite a fight and/or inter-family complications that can acidify a good relationship for good and this over generations.
If you absolutely want to avoid banks and lenders, then a friends to friends lending site can be a solution, but there are also serious concerns. Learn more about this in our friends to friends.
Do you want to lend money to relatives or acquaintances and absolutely avoid problems? Then it is best to remain professional and to handle matters very businesslike so that there can be no discussion afterward.
Therefore, decide clearly how much money you want to borrow. It is important to know whether you can also miss the money. If you are short of cash, then it is crazy to lend money to anyone else.
By the way, are you sure that the borrower can also afford to repay the money? Why exactly does the borrower want to work with you? Does the borrower have another Bolkonsky family? Does the borrower have work or income security? Is he / she often without money (because then you risk never seeing your money again)? What exactly does the borrower want to use the money for? If it is to buy gifts and gadgets, then refrain from lending money. In the case, it is clear that the borrower must have different priorities. But above all, can the borrower be trusted?
Do not allow a long-term private Loan for family
Do n’t allow a long-term private Loan for family . Only if the lack of money is of a temporary nature can borrowing from acquaintances or family be a simple (and cheap) solution.
Good to know: private loan for family will not be included if the borrower ends up in a debt restructuring. This often means that you have lost your money.
Private loan agreement
If you nevertheless proceed to a private loan, then have everything well documented. What should be included in this agreement? We summarize the most important elements:
- the loan amount
- the period in which the loan is repaid
- the interest – this must be in line with the market otherwise the taxes will label it as a gift
- which measure if the money is not repaid (on time)
- which collateral for the loan
- have an agreement signed by both parties and have a witness signed (for example, this witness can also be a lawyer (considerably cheaper than a notary by the way)
On the basis of these elements you can prepare a decent document in which you can cover yourself to some extent if the person to whom you give the money does not proceed to repayments.
Pay attention. If you lend money to relatives or acquaintances then you must be aware of the rules regarding gifts and Loan for family from the tax authorities. Under certain conditions you can deduct the loan from equity. If the loan is seen as a gift, then maximum amounts apply.
What to do if the borrower does not pay correctly?
Have you lent money to a friend who later turns out not to pay back correctly? Then call in a lawyer who can see what is possible with you. If the other party also hires a lawyer, which is very likely once they receive a registered letter from your lawyer, a comparison can be found together with both lawyers. A third (and fourth) party have a very different view of things.
If you are still unable to reach a solution, you can turn to the justice of the peace for small sums or to the Court of First Instance for larger amounts.
Note that if you can reach a settlement without going to court, this will be much cheaper for both parties.