Private loan: how does it work? | Business loan

The loan between individuals is a form of credit. It is a contract that commits a lender and a borrower. This is the quick way to get money without going through a bank. We will make you all the information regarding this type of loan.

Loans between individuals

Loans between individuals

In technical terms, it is called community credit or “Peer to Peer”. This type of loan works in the same way as a loan from a bank. The lender assigns a defined amount to the borrower and the borrower repays it in monthly installments. This repayment is in addition to the interest rate which is more or less low and determined by both parties. This loan is the ideal solution for people who do not get credit at the bank. However, rules must be followed to avoid any disputes. It is better to take a look at it before launching.

The different types of loans between individuals

The different types of loans between individuals

The first kind is “the family loan” or between friends. A family member or friend can lend money to help a loved one. In any case, you must write a loan agreement or a debt acknowledgment. In this undertaking, the amount lent, the term, the repayment dates and the interest rate must be mentioned.

The second is the “solidarity loan” or “peer to peer”. This kind of credit is very trendy on the internet nowadays. The loan between individuals is done by companies on the internet called the “Pure Players”. And it is the latter who play the role of intermediary. The most famous is the company Younited Credit. These companies collect credit funds from professional investors. To make this financing, they are certified by the French Prudential Supervisory Authority (ACPR). The borrower provides collateral and the intermediary arranges the contract between the two individuals.

The last type of loan between individuals is “microcredit”. This type of loan is an alternative to traditional bank credit. Two actors exist in this loan. One is for entrepreneurs and the other promotes social and professional integration of individuals. This insertion supports personal projects that finance specific needs. In order to obtain credit, the borrower is monitored by the association or structure that grants the credit.

Obligatory and reassuring rules for the lender

Obligatory and reassuring rules for the lender

In this loan between individual, various formalities exist for monitoring and compliance. The most important is that the interest rate of this credit does not exceed the rate of wear. To do this, it is advisable to make a debt acknowledgment or a loan agreement. Debt recognition is prepared by hand and on paper by the borrower. Mention the date of the loan, the amount of debt in figures and letters. Below to complete this recognition, these mentions must be certified by the signature of the borrower. For procedural reasons, the original is kept by the lender.

For the other possibility, the establishment of a loan contract is done in two copies. This commitment must be dated and signed by both parties. This time, the copy is kept by both parties. The training of documents may be private deeds or notarial deed. For the last case, fees are collected.

A loan exceeding 760 USD must be declared to the tax department. The borrower declares it by means of a form called Cerfa document. For the lender, if he has only lent to one beneficiary, the lender will not make a declaration. Only that of the borrower will be necessary. On the other hand, if he has lent to several people, he must complete a tax form. In addition, the interest earned must be declared on his annual income tax return.

In short, the operation of the loan between individuals is simple, but we must follow mandatory formalities. Note that the limitation period of a debt recognition is 5 years. After five years, the lender loses the right to be reimbursed. By this you will have access to a large catalog of banks in popular and effective lines!

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