Peer-to-peer lending: how to borrow or lend without unnecessary risk
Contract, tax declaration, segregated account, rates: what to know before lending to or borrowing from an individual.
Lending between individuals is legal, but it must be in writing. A loan agreement, or at least an IOU, sets out the amount, rate, term and schedule. In France, a loan above €5,000 must be declared to the tax authorities (form 2062), and interest received by the lender is taxable.
Ads from “private lenders” on social media are the number one channel for loan scams. The script never changes: quick approval, then “application”, “insurance” or “notary” fees to pay before payout. The money never comes back.
With an intermediary such as Social Help Crédit:
- both parties’ identities are verified;
- money moves through a segregated account at a licensed payment institution;
- no fee is paid before payout;
- repayments are monitored and chased.
As a lender, keep the risk in mind: a borrower can default. Diversify and only lend money you will not need in the short term.