If you need a larger amount of money in the short term, but have no savings to fall back on, you have the option of taking out a loan. The banks seem to be the logical contact for this, after all, they already have the loan in their name. A privately accepted loan can be an alternative. The better alternative?
Is the bank always the best contact when interest rates are low?
As is well known, the key interest rates of the ECB are at an all-time low, which automatically has an effect on bank interest rates. While savers virtually no longer earn interest on their assets, credit and loans of all kinds are available at bargain rates. Bills for purchased consumer goods can be paid at zero interest and the first institutes are even advertising a negative interest rate for loans taken out.
So why not just go ahead and take out a loan? Unfortunately, interest rates are only one aspect of lending. Even with the lowest interest rates, the banks expect their debtors to have an adequate credit rating and clean credit bureau information. Before a loan is granted, all documents submitted are extensively checked and payment is only made if the result is positive. A private loan can be an alternative, since the corresponding tests are (largely) omitted here.
Personal loan or personal loan?
These two terms are very often confused or equated. In fact, they are two completely different things. A personal loan is granted by a bank to a private individual. The opposite of this is commercial credit. A private loan, on the other hand, is a loan granted by a private individual. Incidentally, the recipient of a private loan can also be a company.
Can private individuals grant loans so easily?
The credit check already described is mandatory for banks and credit institutions. Private individuals, on the other hand, are not subject to such provisions. In other words: Even if the loan seeker is unemployed and already completely overindebted, another private individual may grant him a loan. However, there are already some conditions to give criminals hardly a chance right from the start. It is also not permitted for private individuals to link lending with usurious interest rates or unfair “favours”. And by law, private lenders are also obliged to tax any income from lending (i.e. interest gains). In fact, such aspects are of course difficult to control. Especially with verbal agreements, where no witnesses are present in most cases, the evidence is extremely thin in case of doubt. But it is also true that most privately granted loans are rather small.
Is it advisable to borrow money in your personal environment?
To a certain extent, items on loan are daily practice in the personal environment. Whether it's a drill, a digital camera or a trailer for the car: You don't necessarily have to buy everything yourself if a friend or family member has it. Even when it comes to money, small amounts are happily pushed in all sorts of directions. If someone takes over the joint bill in the restaurant, which will only be split later, if it is a matter of buying a birthday present for a third person together, or if you forgot your wallet at home while shopping together, it is good that someone can help you out can.
With larger sums of money things are different. You're usually more than happy to help someone close to you if you can afford it yourself. But one shouldn't be too naïve here either: Is there a real chance that he or she can really pay back the money? In order to rule out a possible annoyance right from the start, a gift is sometimes even the better alternative to a loan. Eventually, the gifted person will show their appreciation in another way at some point.
If you can afford to be generous when granting loans in your private life, there are no obstacles in this regard. However, if things are less rosy for the granting party, the non-repayment of a loan can quickly become a problem. This inevitably has a negative effect on interpersonal relationships. So it's perfectly okay not to lend money as a private individual.
How do you legally secure private loans?
As strict as the regulations in the environment of banks and credit institutions are, the private handling of money is often lax. Incidentally, this is the only way to explain why single, elderly people keep falling for the so-called grandchild trick. As soon as a story presented sounds at least somewhat plausible, too many people pull out their wallets too quickly.
This also applies (and especially) to the granting of private loans. Even large amounts of money in the four or even five-digit range are handed over in a closed envelope after a few friendly exchanges.
Of course it shouldn't be like that. The same applies in the private sphere: only what has been recorded in writing can be proven later. A written loan agreement is also a piece of evidence if the borrower fails to meet his obligations or there is a complete falling out (because of the personal loan or some other reason). Incidentally, the borrower also protects himself with it, after all, all the obligations entered into are listed in detail in this contract.
A notary should always be consulted if private financial transactions involve a very high level (e.g. for the purchase of real estate). If the borrowing agency is a company, it is even mandatory to have an appropriate person provide security.
Can I also borrow money from other private individuals?
It is therefore a double-edged sword to get into debt in one's own private environment or to grant loans. An alternative solution can be private loans between people who do not know each other. Various platforms are available as intermediaries for this purpose. To the mutual advantage of course: Borrowers can get a loan faster and more easily than with a bank. Private lenders, on the other hand, let their assets work, get the feeling of doing a good deed and can also look forward to interest gains. Since the people involved don't know each other, the emotional dimension doesn't matter: this is simply a deal. Of course, one that is contractually watertight, so that everyone involved is on the safe side.
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