More and more Dutch people are opting to borrow money privately. It also happens regularly within my circle of friends. Borrowing money privately is providing a loan to family or friends without going through a bank. If friends or family members need money, of course you would like to help them. But what should you pay attention to?
It may feel like an open door, but this question is very important. Ask about the loan goal before you commit to borrowing money. It is sometimes difficult to say no, but only agree to a private loan if the risks are minimal.
The risk that the loan will not be repaid is always present. No matter how small the risk is. Keep this in mind and consider if you can really miss the money. It would be annoying if you had to take out a loan yourself because you lent your own money.
If you know what the loan target is and how much you can miss, determine if it is wise to borrow privately. Budget advisor Nibud advises against lending money to family members with multiple loans or a chronic lack of money. That way, those involved only get deeper into debt and there is a risk that you will not get your money back.
In general, Nibud advises to be very careful when borrowing money privately. A friendly relationship suddenly becomes a lot more businesslike when money and obligations are added. And that can put considerable pressure on your relationship.
If you have enough financial room, you can also opt for donating instead of privately borrowing money. Donating is a one-time gift after which the recipient and donor no longer have obligations to each other. That makes it a lot clearer. Moreover, you can benefit from tax benefits when it comes to a gift that children invest in their home.
Is there no financial problem and can your friend or family member easily bear the burden? Only then opt for a private loan. If you read a lot of money, it is important that you draw up a loan agreement with the notary. This provides a tax benefit and ensures that the agreements are clear to both parties.
Is it a small loan or is it a notary deed not necessary? Then make sure you have a signed acknowledgment of debt. Here you describe all agreements so that you both know where you stand. Make clear agreements about interest, repayment and consequences in the event of non-payment. This way you prevent unpleasant situations. A debt acknowledgment usually contains the same information as a loan agreement. But it is not necessary to record it with the notary.
I hope I have helped you on your way to making a wise choice about privately borrowing money. All in all it is especially important that you do not lend money to someone who is in debt, make clear agreements and can miss the money himself. Lastly, lending money to family is about trust. Trust that should not be embarrassed by money matters. So be critical. Just as critical as the bank. Only then can you responsibly borrow privately!