Making a private personal loan is legal in France. However, you must be careful to follow the rules, whether you are a money lender or a borrower. So registering a debt recognition will protect both parties in case of conflict, which can always happen when it comes to money. Lending to private individuals entails rights but also obligations. Here are some of them.
Loan as financial aid
Often, the particular loan is made within the same family, out of solidarity. For example, a grandfather may want to finance his grandson’s license, or parents can lend money to their child to do work in his home.
But whatever affection you may have for a loved one, you have to be careful when a large sum is at stake and ensure that it does not harm the relationship.
The importance of debt recognition
The interest of the private loan: the simplification of the steps
Debt recognition is not complicated to implement. It may be a simple document certifying the loan and signed by the borrower and the lender.
This document must indicate the sum lent (in figures and letters), the time of repayment and the amount of the installments, as well as any interest, knowing that care must be taken not to exceed the rate of wear.
Debt recognition is easy to claim in the event of late or no repayment. It proves that the money lent is not a gift.
Some risks remain
In the event of default, the lender can see its financial situation deteriorate.
It is better to lend in the limits of reasonableness, and not to go further financially than what one can do without endangering oneself. Finding yourself in the case of the sprinkler watered is not to wish anyone.
In addition, not going through a bank involves certain risks. For example, an individual can not check the borrower’s debt ratio. Over-indebtedness is therefore possible.
In the event of the death of the borrower, there is no guarantee that the heirs will be able to repay the outstanding balance.
The loan that turns into a donation
Debt recognition also helps to clarify things with respect to taxes.
Because in the absence of such a document, and if the tax administration considers that the lender has done nothing to try to recover his money in a period of time said “medium term”, then she will interpret this transaction as a donation that has not been declared.
Gold that says donation, said taxes to pay, in addition to the possible fines for concealment.
The amount of taxes payable
So if the person to whom you give money is not your child, the tax on this amount will be 60%. If on the other hand it is your child, you will benefit from a tax exemption of more than 150 000 €.
The amount varies each year, move closer to your tax center to know the exact figure.
For those who want to know everything about the PAP loan, these two articles can help you go further:
- A serious site of loan between individuals .
- Parental credit .
Proof of the loan: the importance of having a writing
How to prove that someone owes you money if you have no document to prove it? Indeed, the bad faith borrower can always say that it was a gift.
Know that above € 1,500 loaned, you can not do without a writing. This reduces the risks.
It is not obligatory to sign your acknowledgment of debts before a notary. You will then save the cost of the notarial deed.
However, if the sum lent is important, we recommend you go through a notary because it can avoid going to court in case of conflict. A bailiff may claim the sum for you if he has a notarial deed at his disposal.
What must be indicated
In any case, if both parties decide on a refund with interest, the total amount of what is due must be indicated.
These interests are taxable on income tax and subject to social security contributions. The box to be completed on your tax return is that of “movable capital income”.
The schedule must also be specified. If monthly payments have been decided, they must appear there.
Remember to point out that the borrower’s heirs will have to repay the balance due in the event of the borrower’s death or that the borrower will have to pay the outstanding amount to the lender’s heirs.
Registration of the debt recognition
All you have to do is register the document with your tax office.
This registration has a cost: 125 € per declaration. In principle, this cost is borne by the borrower.
Attention: All loans above € 760 must be declared there, even if no certificate has been drafted. In the event of non-declaration, offenders are subject to a fine.
What to do in case of non-refund?
As a last resort, the court will settle the situation. The court concerned depends on the amount involved:
- Below 4 000 €, it is the judge of proximity.
- Up to € 10,000, it is the Court of Instance (TI).
- Beyond € 10,000, it is the Tribunal de Grande Instance (TGI).
In case of proceedings before the Court of First Instance, know that you must compulsorily take a lawyer, and that his remuneration will be at your expense until the final decision. The loser will also have to pay for any procedural costs.
So as not to have to get to that point
We recommend that you try to arrange things amicably. Although this is not always possible, especially in cases of manifest bad faith.
If you have borrowed money from an individual and are struggling to repay it, it is best to try to find a compromise with him about the future payments (on the due dates and the amount).
In any case, do not wait until your situation deteriorates further.
In the end, borrowing between friends is possible, which allows to do without banks. Still, it must happen properly. Everyone knows that in terms of money, friendship is often hard to resist, so mistrust.