Another Option for Obtaining Financing

Another Option for Obtaining Financing

The figure of private lenders has existed almost as long as money has existed, but with the emergence of banks their presence in the market was reduced. And now we find that this form of financing is once again becoming very popular due to the difficulty some people have in getting a bank to lend them money.

How does a peer-to-peer loan work?

The way it works is very similar to when the transaction is between an individual and a bank. Both parties sign a private-to-private loan contract in which the creditor agrees to lend the other party a certain amount of money and the debtor agrees to repay that amount in the agreed time and manner, as well as the agreed interest.

Types of loans between individuals

Loans between family or friends

We have already talked about family loans. By way of summary, it is sufficient to point out that it is convenient to record the agreement in writing, not only for the greater security of those involved, but also so that the Tax Authorities do not consider it to be a donation and try to charge taxes on it.

P2P Lending

Person-to-person lending is nowadays mainly carried out through crowdlending platforms. In this case the lender is rather a professional investor who lends his money to someone who is starting up a business and needs financing.

In these cases there are usually several private lenders investing in the same project, so it is easier for the entrepreneur to get the amount he needs. The great advantage of this type of loan is that no collateral is required.

The loan contract between individuals

If the operation is done through a crowdlending platform, the platform will be in charge of the documentation. If it is directly an agreement between two individuals, it is advisable to record the agreement in writing.

The contract should contain the full identity of the parties, the address of the parties for notification purposes, the amount that has been lent, the interest that applies (it is possible to agree on an interest-free loan), the time and form of repayment and all those aspects that are considered relevant.

The date of conclusion of the contract must be recorded and it is convenient that all the implied ones sign in all the leaves, remaining a copy the creditor and another one the debtor.

Are taxes paid?

This is a case of tax subjection and exemption. That is to say, you have to file the Transfer Tax and Stamp Duty so that the Treasury has proof that it is a loan, but you do not have to pay any taxes.

Associated expenses

In these cases the contract can be made in private document, it is not necessary to go to the Notary, reason why the normal thing is that there are no associated expenses. However, if you work through a crowdlending platform, it is normal that it charges a commission.

As you can see, loans between individuals are a good financing alternative, but our recommendation is that, as far as possible, you avoid borrowing money. To do this you will need to organize your finances in a way that allows you to cover your needs.

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