Lending money to friends or acquaintances you call private borrowing. The advantage of this is that you can arrange everything quickly and easily and that you can also borrow with a negative BKR registration. Be careful when providing a private loan.
Lending cheaply to your friends may seem attractive, but there are also disadvantages. Therefore always make sure that you record all agreements made in a contract.
Borrowing money, doing it or not?
Advancing a dinner once will probably not lead to difficulties. But lending a larger amount is another story. Why does your friend want to borrow money from you? Does he want to start a business and is he looking for starting capital or does he have financial problems?
If there is a healthy financial situation, you can consider borrowing money. But if your friend already has financial problems or debts, it’s better to see how you can help them out instead of borrowing money.
Example contract loan friends
Does lending money to your friend fit both with you and with him? Then of course you can lend the money. But make sure you record everything properly in a contract. At the moment you may think that a contract is not necessary, but when it comes to money, even the best friends can do crazy things. Then you better have the agreements made in black and white.
The contract states, among other things, the date and your personal details, the amount you borrow, which interest rate charges you for this, and when and how your friend repays. The contract must then be signed by both of you. You can find a handy example of a contract on the website .
Lend money to friends – Tax
If you lend more than 2,129 dollars, you should always charge a market-conforming interest rate of at least 6 percent. If you do not do this, the Tax Authorities will not see this as a loan, but as a gift and your friend will pay gift tax on the part above USD 2,129.
If you don’t want your friend to pay interest rate, you can use the exemption to return the interest rate. Make sure that the interest rate that your friend pays does not exceed 2,129 dollars, after which you return the same amount.
Lend money for the home
Lending money to a friend to finance a home works almost the same, only you have to record this loan in a notarial deed. The notary explains exactly what must be stated in this deed and what this deed costs. Do not be put off by the costs, because only with this deed does your friend, for example, have a right to a mortgage interest rate deduction.