Loans between individuals: with or without a contract?

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Loans between individuals are becoming a good financing option because the interests of loans offered by banks are increasingly higher, and not to mention fast loans. The options for getting financing are getting smaller and a good option is to turn to a friend or relative to lend you the money, in this way both win, borrower and lender. If retribution is established, the lender can obtain a return on his money and the borrower can get the money at a lower interest rate.

Although loans between individuals are based on trust, it is best to record this through a contract for loans between individuals, which can avoid many problems.

If there is no contract, what problems can I have?

If there is no contract, what problems can I have?

According to the Law on the Income Tax of Individuals, in a loan between individuals, the Treasury may assume that there will be remuneration and will force the lender to declare in the IRPF the interests, whether or not they exist.

The legal interest rate of the money will be the one that will be applied, which is currently 3%. If we establish a contract between both parties, the Treasury will not apply this interest, and the lender will not have to pay for the possible interest.

Another problem with which we can find is that the Treasury considers that it is not a loan between individuals, if not a covert donation, with the objective of not paying interest. Any donation is subject to the Inheritance and Donations Tax, while the loans are subject to the Property Transfer Tax, but with the contract for loans between individuals (Model 600), they will be exempt.

Since they are long-term operations


It may happen that the borrower and/or the lender die. As we know, debts are not extinguished by death and will pass to the heirs. What happens then?

  • If the borrower dies, the debt will be incorporated into the inheritance and it will be his heirs who pay the debt.
  • If the lender dies, the debt will be a right in the inheritance and one or more heirs will be the ones who receive the money.

If it is a loan between relatives, the child who received the money will become a debtor and heir, therefore the debt will be extinguished, unless there are more heirs and they want the part of the money that belongs to them.

A loan agreement between individuals


A contract for the loan between individuals is ideal, since it is useful to formalize the agreement between both parties, and you will have to register with the Treasury to become effective. Depending on whether the loan between individuals is going to have interests or not, the model of the contract will be one or the other.

The most important aspects of the contract for a loan between individuals is:

  • Date and place
  • Personal data of the borrower and lender
  • Amount to lend
  • Loan duration
  • Whether or not interest will be applied and the type

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