It’s been almost eight years now that the whole world has experienced a catastrophic financial crisis. This global economic upheaval has brought with it more or less considerable damage, not only in every household, but also in some companies. Today, few households are able to independently endorse their budget needs. Credit systems then became indispensable to fill the void left by the recession.
Whatever the reason for applying for credits, funding from a source of money outside personal savings or sources of income is inevitably solicited. The requested funds can be used for investments or financing of any project. Indeed, financiers offer widely extended forms of credit on the market to help individuals or companies realize their projects. Credit agreements, once processed and completed, allow beneficiaries to save time while keeping the opportunity to save money in parallel.
Mutual benefit for everyone
When thinking about credit, the most common are banks, financial firms, cooperatives or credit institutions. Sometimes the credits offered by these financial institutions come with rates that may be too excessive. The fees are also more important and variable depending on the lending houses, especially as some of them impose fees excluding taxes. Agreements and conditions with these institutions are often complicated because too many files and supporting documents have to be collected. Obtaining other forms of consumer credit or mortgages requires personal contributions or guarantees. The number of borrowers stuck at the Bank Fras is growing. These people are forced to find other sources of funding since they can no longer benefit from the services available in the market.
The French began to practice the American system in recent years. Individuals offer their help to homes with lower incomes to satisfy their desires. The latter obtain credits whose total costs and applied rates are much lower than those of banks or other credit firms. The necessary files are few and the contractors do not need an intermediary from a specialized agency. Accessibility to this mutual credit is much easier for people with financial disputes with banks.
Individuals who already have a personal loan agreement approve their benefit. The transaction is more flexible because no mediator from any organization comes into play. As a result, the number of individuals who manage between them increases while those who go to the bank are decreasing. We are talking here about a credit agreement between one individual and another, both sides commit their own way. There is also the possibility that the lender is a group of several people to finance the request of an individual as business angels do with startups. This form of credit is called interpersonal loan.
The main features
As already mentioned above, the loan between individuals is a practice from the United States. Its principle is very simple, it is to borrow a certain amount of money from one or more people without any assistance from a bank. This is the reason why some people call it credit without a bank, or borrowing between individuals. This system of mutual aid is a new fact that recently began to gain space in the tricolor country. The loan between individuals will soon exceed other systems such as mortgage or consumer credit. It is considered a revolt in the financial sector and is a loophole for those who are stuck in the Bank of France. Whether the two signatories are neighbors, families, colleagues or friends, this type of loan is a good alternative to support family members with hardship. And since it’s so simple, it’s better to try to seize the opportunity to kill two birds with one stone: to make profits while helping to offload others from their burdens.
The operation of the loan between staff
When you are short of money and want to find a lender, remember that going to a financial institution is not the only way out. A compromise of credit contract can be made between private citizen. From now on, it is advisable to formalize this action to avoid any further trouble. Like all negotiations on money issues and loans, there are paths to follow from where a sequence of implementation. Do not worry, because it is a very basic maneuver, unlike the reunification of files for other forms of loan from banks.
To begin, one must consult one of the sites specialized in this field. This is where you sign up so you can apply for a loan. After this registration, it is possible that brokerage advisors or a brokerage agency will contact you. Their role is to find the credit at the best rate that corresponds to your personal situation. At least, a landlord will surely see your wish to lend and will contact you. He will email you the form to complete after speaking with you.
A letter of recognition of debt
A handwritten document must be signed by both sides for the transactsion to go smoothly. It is sort of a letter of recognition of debt that is required in civil terms to a certain amount of credit. His existence rules out the fact of being brought to justice if one or the other deviates from the rule. This initialed contract will serve as a guarantee for the creditor that the reimbursement will indeed be made. It will be used to justify the remittance of funds and will facilitate the collection of the loan if ever a problem arises.
On this letter, some criteria should be mentioned such as the methods of debt repayment and the duration of the loan. Each of the signatories must hold a copy of this letter and a third goes with the records during the registration. From now on, there is also the option of setting up a notarized mortgage agreement. The files in question include a photocopy of the debtor’s identity card and payroll, as well as the details of the project. However, the value of the money to borrow is to be taken into account because it can change a lot of things on the steps to follow.
Proceedings depending on the amount
As the loan amount is raised, certain conditions take on another form and other commitments arise. It must be remembered that the salary of a loan between individuals is free even if the interest rates applicable must respect limits. Thus, the creditor is exposed to tax obligations if the amount he lends is above 760 USD. It is from this level that the writing of files including a letter of recognition of debt is claimed. There are cases where the same creditor and debtor end up with the obligation to enter into a second credit agreement see more. Two or more loans each less than this amount will have to be declared if their total reaches this limit. You will not be able to do the trickery by dividing a loan whose amount exceeds the limit in several fractions.
The lender and the borrower are then obliged to follow and fulfill some tax rules. The creditor is forced to declare the interest collected during the tax return, while the debtor must make a declaration of the existence of the credit and declare the interest that has been imposed on him. For a lender who has a credit agreement with interest, his taxable wealth can pick up the consequences. As the interest collected is subject to a declaration, it must be included or deducted in this taxable estate. Your liability to the wealth tax requires you to add the loan. If not, you can deduce from it.
What to do in case of litigation?
In any case, we must expect all eventualities. No one is safe from an unforeseen situation such as an accident or other mishaps. A borrower may then be unable to fulfill his or her commitment and the inability to repay the loan. If at the beginning you have a notarized mortgage agreement, the related guarantee is therefore for the benefit of the creditor. In the case where both sides have contented themselves with a simplified clause, the intervention of the court is the only solution. At each level of the loan amount corresponds a step to adapt. There is not much difficulty if the amount is less than 4,000 USD. From this amount up to 10 000 USD, you must request the service of the court of first instance. Lastly, recourse to a legal defender is the only way out if the sum in question is above ten thousand USD.
In conclusion, even if the loan between individuals is very simple and easily accessible to everyone, precautions are recommended to avoid regrets. Money issues must not be a source of conflict between relatives.