Here's what you should pay attention to when lending money to an acquaintance.

Make Clear Agreements

Before you lend money, it is crucial to make clear and written agreements. Define important details such as the amount and the interest rate. This creates clarity and minimizes the risk of misunderstandings.

Contractual Security

A solid loan agreement is the backbone of any financial transaction. This document sets the agreements between you and your acquaintance in clear and binding terms. Here are some important elements that should be included in the loan agreement:

Amount and Interest Rate: Define the borrowed amount and the interest rate (if applicable) that you agree on for the loan. Ensure that the interest rate is reasonable and corresponds to current market standards.

Repayment Terms: Specify the timing and method of repayment. This can include a lump sum payment or installment payments.

Loan Duration: Define the period during which the loan must be repaid. Clarity regarding the timeframe prevents misunderstandings.

Contract Signing: Ensure that the contract is signed by both parties. This reaffirms consent to the agreed terms.

Repayment Clause: Add a clause that regulates how to handle missed payments or delays. This ensures that there is a clear plan in case of difficulties.

Consider Tax Implications

If you lend money to an acquaintance and receive interest, this interest income must be declared as part of your tax return. Also, the granted loan must be listed in the securities directory. It does not matter whether it is an interest-bearing or interest-free loan. Your acquaintance, in turn, can declare the loan as a debt in the debt directory and thus deduct it from taxes.