The economic crisis is hitting households hard. Consequently, financial organizations are increasingly reluctant to grant financing. Peer-to-peer lending is becoming a preferred alternative for many people.
First of all, between friends or members of the same family, these “private loans” are often made without any agreement, so much so that it becomes difficult for the lender to prove their existence. Our lawyer takes stock of the different ways to protect you in case relations with your borrower deteriorate.
An authentic deed or under private signature
The authentic deed is a writing passed before a notary which has a probative value that can hardly be called into question. The private deed is a simple writing drawn up between the lender and the borrower.
In both cases, the full identities of the parties must be indicated, as well as the place and date of the conclusion of the contract. It will be useful if the contract mentions the amount loaned, the means of transferring said amount, the repayment terms, the legal interest rate, the duration and the objective of the loan. It is always preferable that the borrower expressly declares having received the amount lent.
All parties must sign the contract by preceding their signatures with the words “Read and approved”. The contract must be drawn up in as many copies as there are parties.
For example, if you decide to lend €20,000 to your cousin who is married under a community regime. Three signatures will be required. Yours, your cousin’s and your cousin’s wife’s. It will be necessary to establish 3 original copies and each person must have their own.
An acknowledgment of debt
Another way to formalize the loan is the acknowledgment of debt. This is a unilateral written act by which the borrower acknowledges owing a sum of money to another person, the lender. The acknowledgment of debt does not necessarily have to be drawn up before a notary. It can therefore be a simple act under private signature.
In principle, the acknowledgment must be written entirely in the borrower’s handwriting and kept by the lender until full repayment of the amount borrowed.
In the event that the acknowledgment is not entirely handwritten, it is necessary for the borrower to handwrite the formula “good” or “approved” with the amount indicated in full.
The acknowledgment of debt must of course be dated, signed and mention the full identities of the parties. The parties are free to add other information such as the interest rate or repayment terms. It is not required that the acknowledgment mention the cause of the debt.
Recommendations for a loan between individuals
Finally, we can only recommend that you respect the formal rules surrounding the drafting of the aforementioned acts. Failing this, they may be reclassified by the judge or simply declared void.
You will then have all the trouble in the world to prove the existence of the loan, except on the basis of repayments already made or on the basis of any letters by which the borrower confirms the existence of a loan.
