A loan between individuals: the principle
As its name suggests, a personal loan is a type of consumer credit that is entered into directly between two individuals without going through a bank or credit institution.
It is also found under the name of bankless credit, social credit, community credit or credit from individual to serious individual. The abbreviation PAP or P2P (for ” peer to peer lending “) is also used.
Loan between individuals is an old phenomenon: it was not until the twenty-first century that individuals lent themselves money between members of the same family, friends, and so on. It has however experienced a real boom in recent years with the Internet and the emergence of specialized platforms to connect individuals or set up participatory Sam Spadements.
How the loan works between individuals
Concretely, how does the loan between individuals work? It should be known that the practice, if it is simple to put in place, remains regulated. The lender and the borrower have to put their agreement in writing on a signed document. This is called debt recognition .
The debt recognition must mention in particular:
- The identity of both parties, namely the lender and the borrower;
- Loan amount, date, term and interest;
- The method of payment of the sum borrowed;
- The way the refund will be done.
The same elements as for a conventional loan agreement, in short! It is important to write a document detailing the terms of the loan to protect yourself in the event of a dispute. It is this recognition of debt that will serve as a guarantee and will prevail in the courts if the lender and the borrower disagree.
What about the interest rate?
The lender may decide not to apply an interest rate and claim only the repayment of the sum lent or may decide to apply an interest rate, as when it is done with a bank or a credit institution. In this case, the credit rate is defined by mutual agreement between the two parties. As for conventional loans, it is mandatory not to exceed the rate of wear .
Should a loan be declared between individuals?
For less than € 760, no. On the other hand, from € 760 , the loan between individuals must be declared to the tax authorities (form n ° 2,062).
If the loan is free, the borrower has only to declare the amount on his tax return. On the other hand, if it is a loan with interest, the lender is required to declare it in its annual income.
Special credit: the benefits
Credit between individuals attracts more and more people, not without reason: this formula offers many advantages, both to lenders and borrowers.
The advantages of the loan between the individual for the lender
The advantages for the lender are above all financial: thanks to the interest of the credit, the loan between individuals makes it possible to earn money . In many cases, profitability is better than with other types of investments, such as savings booklets.
Another important advantage: the loan between individual is very easy to set up and secure. Today, there are dedicated online platforms for connecting lenders and borrowers. Lenders can therefore easily select profiles that interest them.
The advantages of the loan between the individual for the borrower
The loan between individuals is very interesting for people whose borrower profile has been deemed “at risk” by banks and have been denied credit (for example, people with modest incomes, bank bans stuck with the Banque de France …).
Other advantages :
- The possibility of obtaining a cheaper credit than through a bank or a credit institution, thanks to more competitive interest rates;
- As for the lender, the possibility of agreeing on the terms of repayment of the loan;
- Reduced fees
- Lighter administrative constraints, a lighter loan application;
- Greater speed of obtaining, because the examination of the file is more flexible. Sam Spadement’s need can be filled more quickly.
The limits of the particular loan
The system of loan between individuals allows to obtain a loan in another way, without going through the institutional way. But this ready guy still has some limitations. The riskiest profiles (over-indebtedness, prohibited banking) are not guaranteed to obtain a loan via this system, simply because private lenders can be as reluctant as banks and are not obliged to accept applications. On online personal loan platforms, registration may also be denied.
What can finance a loan between individuals?
A loan between individuals allows to finance any type of project , just like a personal bank loan. So, you may be interested in a particular credit for all kinds of reasons, for example:
- Sam Spader a project: purchase of a car, motorcycle, appliances, a trip, a wedding, work …;
- Facing an immediate or unexpected need: pay taxes, electricity, gas bills, repairs, a child’s schooling …;
- Create your business and get some funds to get started.
Credit between individuals: some precautionary statements
Today, the offers of loans between individuals are numerous and have developed considerably on the Internet (social networks, forums …). Some tips to stay vigilant against offers sometimes very attractive.
As the Ministry of the Economy reminds you, on the forums or by mail, you will receive messages like: “I am Mr X, an individual who offers loans to individuals who need a personal investment at a rate 2%. The amount varies from € 2,000 to € 800,000 … ” . Do not respond to these messages despite the attractiveness of the offer: they are almost always fraudulent.
On the contrary, if you are looking for a lender, opt for online platforms that you could check registration. Reliable lenders go through platforms approved by the ACPR (Prudential Supervisory and Regulatory Authority) and registered with the ORIAS registry (Single Registry of Insurance Intermediaries, Bank and Sam Spade).