How do i handle a private loan?

Are you currently looking for interim financing for your planned project?? Then a personal loan among friends or. closer acquaintances as a favorable loan option and alternative to a traditional bank loan. However, this loan should be handled properly. Rough mistakes should be avoided in advance. In principle there are no regulations that require a defined form.

There is no special written contract or even notarial contract requirements. Nevertheless, we recommend the written form as a later means of evidence. If you have granted a personal loan as a lender, you must be able to prove this later, if a dispute arises. Remember: As the lender, you have the burden of proof.

Especially with loans in your own family, for friends or close acquaintances, it is advisable to draw up a short document to avoid disappointment and anger later on.

Our recommendation for loans of any kind is always to use the written form for a loan agreement. It is irrelevant whether it is about the brother, the sister, the father or the friend. You are in the burden of proof when it comes to the dispute. You must prove that the loan was indeed a loan and not a gift, as the borrower may now claim. You can find a variety of loan templates on the Internet. You can download a simple sample loan agreement here:

These data belong in a loan contract

There is no legal definition for a loan agreement. There is also no legally binding contract. Nevertheless, you should at least note down the key points together with the borrower. Agree exactly who is the borrower and who is the lender. The loan amount, date and terms (interest) should be agreed upon. Also agree on the form in which the loan is to be repaid and when and how interest payments are to be made. If you have granted the loan, have this confirmed either in the loan agreement or separately. In the attached sample you will find possible formulations. In principle, you are free in the choice of interest rates. However, make sure to agree on market interest rates. If you can be accused of usury here, the interest agreement is invalid and you will not receive any interest. Usurious interest rates are significantly higher than the market interest rate but are not specified in detail. As a rule of thumb, the interest should not exceed twice the market interest rate.

In any case, agree on a fixed date of repayment of the loan. If you do not define a repayment date, the legal regulation applies. Here 3 months are defined as the notice period. If you have made use of this time limit, you are entitled to terminate the loan agreement and to reclaim your loan. If the borrower does not comply with your demand, you can put the borrower in default and send reminders. Here it is important that you set deadlines on your part. If the borrower does not object to this procedure in a binding way and in writing, your only option now is to go to the district court. This is where you need to apply for an enforcement notice and try to obtain a title. You can, of course, take the legal route straight to court, but this involves significantly higher costs.

It is significantly easier for you as a lender. You agree on a collateral, which is transferred to you as collateral for the period of the loan. This can be easily written into the loan agreement and serves as an additional safeguard for you, the lender, should default occur. We recommend to always use a security in the private sphere. If the borrower does not want to get involved, this is always an indicator that the loan will probably not be repaid either. Accept collateral that you can quickly turn into cash on your part. Here you offer yourself jewelry, securities, a car, etc. to.

Please note that interest income from privately granted loans is taxable! If you exceed the tax-free limit of 801 euros (1602 euros for married couples) per year, you are required to list it on your tax return

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