Always secure your friends’ loans well

 

 

It may not apply to you yet, but in the spirit of the “never speak never” rule, in the near or distant future you may be approached by an acquaintance, neighbor, colleague or friend asking for financial help.

This does not automatically mean that he is in such trouble that he will probably not be able to repay or repay the loan, but… It is always good to think about such a scenario before lending it to him.

In any case, keep in mind that as a person who does not have a valid money lending license, you do not have the opportunity to look into the credit registers and thus do not have the opportunity to “knock” your friend over.

Our advice is: if it is not really a very close person or a family member (and even in this case we recommend maximum care), for whom you would “put your hand on the fire”, you’d better politely refuse!

Later, you could grab your head and cry over the spilled milk. Experience from practice shows that loans between friends can end up in lengthy court proceedings and it also happens that the creditor loses his money for good! There is probably not much to say that not only friendly but also family ties are destroyed…

Recommend him to apply for a loan on our website and he will be sure that he will not buy a cat in a bag. We only work with solid companies.

However, if you still decide to help your friend, despite the high risk of (non) return on borrowed funds, do not just think about the amount owed, the maturity of the loan, the amount of any interest or penalties for late payment when writing a loan agreement.

Our advice is definitely the provision of funds to properly secure and the contract agreed way of ensuring commitment explicitly mention! If you are lending as a private person to a friend, you have several options to insure against his inability to meet his obligations to you.

Not all forms of security always come in handy

Not all forms of security always come in handy

The Civil Code allows, for example, the securing of your receivables by a contractual penalty, liability or lien, but not always and not in all circumstances, these forms are appropriate and advantageous.

For example, if you have agreed in a loan agreement to pay a contractual penalty if your friend does not properly fulfill his obligations to you, you cannot count on him to play a significant “deterrent” role. To put it bluntly: if your acquaintance finds himself in a tight spot, some “ridiculous” fine will not force him to return what he owes right away. In order to get your money’s worth, you will most likely not avoid a lawsuit that may not go as fast as you would like.

A lien – whether for real estate or a movable property – is an excellent form of securing a loan, but it is quite often the case that the borrower does not own any assets that can be fully guaranteed. Or even if he owns it, he can no longer guarantee it because he has it “established” due to another loan or commitment. Under normal circumstances, writing a lien on a loan on your part as a lender is an excellent move to secure your peaceful nights, but objective circumstances do not always allow it.

There are also problems with securing a claim by the guarantor in practice. Finding and convincing someone nowadays to go guarantee someone’s loan is very low, almost zero. You can also find more information in our article on liability weaknesses.

TIP: If you can, you better avoid borrowing from friends. This carries not only worries about the administrative and legal side of things, but also the sleepless nights scenario, if for some reason it happens that your friend or colleague will have a problem with repaying the debt. Instead, recommend one of the reliable online loans that we have verified and selected for you.

What to do if the borrower does not return the money?

What to do if the borrower does not return the money?

In such a case, it is not very sensible to rely on the fact that it is just a small overstep and the debtor will “get common sense” in the near future. First of all, contact him, either by phone or in person – depending on which form you prefer – and let him know that he did not return what he had. If he does not hide and refuse to communicate with you, but rather tries to persuade you to delay the due date for a certain period of time, this is the best option. In this case, ask him to sign a debt recognition. In it, you can also agree on the return of the borrowed amount in the form of several installments and extend the total maturity of the loan.

The second, for you as a creditor, a worse option may occur when the debtor refuses to sign the debt. Then don’t wait unnecessarily and proceed to vigorous enforcement. You will have to bring an action in court in the form of an application for a payment order to pay the amount due. However, if you are not proficient enough in legal matters, you probably will not be able to do without an experienced lawyer who specializes in debt collection. It will not be free and you still have to count on a court fee, which represents 6% of the amount sued!

If you are aware of all the possible risks, but you still haven’t told your friend and you’re going to lend him money, we recommend two full-fledged ways to save you a lengthy court file: To secure your claim:

  • Liability by notary minutes
  • Bills of exchange liability

Liability by notary minutes

Liability by notary minutes

We speak of this type of liability if you conclude a loan agreement in front of a notary and he notates the notarial record. Such a contract has a higher credibility and probative value in the eventual recovery of the debt than a conventional contract concluded only in the presence of the parties – the creditor and the debtor. In addition, the notary, as a public authority, is responsible for identifying both parties to a contractual relationship.

Notarial companies also use the notarial guarantee for some of their loan products, providing them with a high guarantee that they will get their money in the event of non-payment of the loan without any major problems. The notarial record is in itself already a writ of execution – it is therefore possible on its basis, if the debtor does not fulfill his obligations to the creditor, practically “immediately” to carry out the execution.

According to the law, the notarial record must contain the debtor’s consent to its enforceability – the so-called enforcement clause. This, to put it simply, means that the court will then, if you “scold” the friend you have borrowed for money that he does not want to return to you, without further in-depth examination of the case, knocking out the execution . No lengthy coaters!

Therefore, you can also use it for sure when providing loans for non-banknotes! If you are writing a loan agreement, not explicitly, but still recommend that you do so in front of a notary, who rather notes it. Although the fee of a notary costs something, it is not a horrible amount (the notary’s minimum fee is 16.60 dollars by law) and with a higher amount of funds you lend, it is worth it. In addition, given that, without a notarial deed, traditional court fees would represent 6% of the amount sued, which, for example, in the case of a 3,000 loan, could be 180, everything is even clearer.

Too much consumer credits? Think about redemption of credits.

Consumer credit, whether it relates to earmarked or unrestricted loans, is a great financial tool to finance your projects other than the purchase of real estate. However, it is still an amount to be repaid each month, and it can happen that credits accumulate until you put yourself in a difficult financial situation. The solution of buying consumer credit can then bring you a real breath of fresh air and allow you to find a balanced budget.

The different types of consumer credit

The different types of consumer credit

Consumer credit is a contract by which a lender (a financial institution) provides you with a sum of money (up to 75,000 USD) which must be repaid in installments and which is not intended for the purchase or construction of real estate. There are two types: assigned credit which finances a defined asset such as a car, a gift, a trip, capital equipment, works.

Unrestricted consumer credit makes it possible to obtain a sum of money, the use of which is left free to the borrower. Thus “personal loans”, “revolving credits” (formerly called revolving credits), fall into this second category of unrestricted credit.

In the majority of cases, consumer credit is distributed by banks and most so-called specialized establishments. These establishments are regulated and controlled by the banking authorities and grouped into professional associations (the FBF and the ASF).

Restricted loans, on the other hand, are mostly taken out outside of bank branches, and mainly in retail and distribution companies. Since the 2010 reform, the employees of these companies who are not bank staff must be trained in the distribution of consumer credit and in particular in the prevention of over-indebtedness.

Reasons to redeem consumer loans

Reasons to redeem consumer loans

Despite all your precautions, it may happen that your consumer credits accumulate to threaten the balance of your budget. The monthly payments then become too heavy and your living quarters decrease until becoming insufficient to ensure your regular expenses. In this situation, your debt is too high and it becomes urgent to take action.

The purchase of credits allows you to find a balanced budget. It is also a timely solution when a change in family or professional situation causes your income to decrease. Likewise, when you are considering new investments but your indebtedness no longer allows you to take out a new loan, buying back credits can be of great help to you.

The characteristics of buying back consumer loans.

The characteristics of buying back consumer loans.

The principle of buying consumer credit is simple . The idea is to have all of your consumer loans bought back by your bank or other financial institution, and replace them with a single loan on more favorable terms. This can be done regardless of the number of consumer loans and whatever their rate or duration.

After buying back credits, you will only have to pay one monthly payment, adapted to your income and current expenses. You can thus lower the amount of your monthly repayments in order to find a healthier financial situation.

In some cases, by extending the duration, you can reduce your reimbursement charges by more than 50%. The purchase of consumer loans can also include other debts (such as tax arrears) or an additional amount that will allow you to finance new projects.

This redemption of consumer credits takes place over a period of between 5 years and 12 years. You also have the option, if you own a mortgage. This is called mortgage repurchase and in this configuration, you can get a longer loan term, up to 25 years.