Borrowing money privately and the importance of a loan agreement
We regularly see it around me personally, friends or family members that borrow money from one another. The number of private loans offers risen sharply in recent years. Asking for money privately has benefits, but can also cause a wide range of trouble. Therefore always report all agreements in a mortgage agreement. How? You can read that will here.
Lend money privately
Last year, 5% of Dutch families borrowed money from loved ones or friends. This quickly increased to 9% this year. Current figures are not obtainable, but I see that personal loans are becoming more and more regular. The one time it is a little loan for a few hundred pounds. But sometimes mortgages may also be arranged with each other. Making great agreements in advance in a mortgage agreement is therefore extremely important. Because nobody is awaiting conflicts over money. Not really you either?
The money lending agreement
A loan agreement contains all of the necessary information about the mortgage, the provider and the receiver. If you borrow money in the bank, you will always obtain an agreement. This way you know where you stand. Do this furthermore if you borrow money through each other. Have the loan notarized if it concerns a high quantity. This way, both the lender plus borrower can benefit from a taxes advantage.
Ensure that the following information is in any kind of case included in the loan contract:
- Name plus address
- Resident service number
- Interest and loan quantity
- Duration plus agreements on repayment
- Signatures and place associated with the signature
Interest on the market
Be sure that the interest that you set in the particular loan agreement is in series with the market. Otherwise there exists a chance that the tax regulators see it as a gift rather than a loan. And that can cost lots of money.
Mortgage curiosity deduction and private mortgage
Does your son or daughter lend money for a new house? Then the loan must be paid back on 1 January 2013 in order to be eligible for interest deductions. Just like a mortgage with the financial institution, the term may not exceed 3 decades. Also include this in the contract.
Whether or not in order to borrow money privately?
After all the practical guidelines, I still have to end having a question of conscience. Mainly because is it wise to borrow for yourself? Of course I cannot answer this particular question for you. But be cautious beforehand. Can you really miss the cash? What are the consequences if the mortgage is not repaid? And, just for borrowers, can you spend the cash without having the feeling of being responsible? That is because you feel that it is best to avoid.
Be cautious and draw up a loan contract
Friends or members of the family helping each other is something beautiful. And it must stay that way. That is why I think it really is so important that everyone included think about it carefully and set up a loan agreement. Only after that will you make an informed choice and protect your precious friendship or family connections. Really do so!
Want to know more about lending cash to family or buddies? Read also Borrow cash to family? Avoid complications! and Lend to family or even friends. A good idea?.