Borrow your (grand) children money to buy or build a house: every parent has already thought about it. Or when a friend approaches you and asks if he can borrow a small sum of money, you may have no idea how to respond. We give you all the information for when the time has come, because you can’t handle money recklessly.
Paper or no paper?
You are not legally required to conclude a paper agreement, but it avoids discussions and misunderstandings. If a friend asks you for a loan, there is a possibility that the bank refused a loan and that he has serious financial problems. It is therefore important that all parties involved sit down at the table and have a thorough conversation before exchanging money and signatures. As a parent or partner it is sometimes difficult to put something on paper, but it is better to prevent it than to cure.
Anyone who has something on paper has the right to claim his money at the agreed times. Without a loan agreement you have nothing to say as a creditor: it is your word against that of the other party – and if you cannot prove anything, you cannot claim anything either. We therefore strongly recommend that you go for the paper version of a friendly loan: you can have it drawn up by a notary, or you can do it yourself.
How do I get started?
You need to draw up a loan agreement for large sums of money. If it is a small loan, then a debt confession by the person in need of money is sufficient. This only needs to be signed by the debtor and should preferably be written entirely by hand. This can be very brief, such as:
Anyone who borrows a larger amount and chooses to draw up a loan agreement themselves must know that a number of mandatory statements are required. It goes without saying that both parties must be mentioned (surname, first name, address, place of residence). In addition, the contract must also state the amount, duration, interest rate, dates of payments, account number of the recipient, any guarantees and how payment will be made. You prepare the document in duplicate, have each page initialed and have ‘read and approved write’ for the signature – that’s even more conclusive than just a signature
Finally, you must resolutely choose to make every payment by bank transfer, which is in the interest of all parties. For example, the creditor can prove that he has actually lent the amount and the debtor can prove that he is paying the sum correctly.
Tips and facts
There are a few things you need to know before you decide to lend money. We list the most important ones:
If you withdraw money from a savings account, you will lose interest. But who charges interest, must pay a withholding tax on it and therefore declare it with the taxes. A choice that you must consider carefully, only.
If you are not married as a creditor under the separation of property, then your spouse must also sign.
Those who want to be completely sure can register their contract in a registration office with a one-off cost of 25 euros. This way your agreement has a fixed date.
You can convert a loan to your children at any time into a donation.
Are you going to lend money to someone? Then ask yourself if you do not enjoy a tax benefit. If you lend to your children to renovate, you may be entitled to a tax reduction of up to 625 euros per year.