Borrowing money privately: what interested parties should bear in mind

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Almost everyone has been pushed to their financial limits at one time or another. Whether it's a short-term car repair or a broken washing machine, savings are not always sufficient to cover additional costs in the short term.

While some concerned do not hesitate long and go to their bank to take a loan, there are others who opt for a private loan. Thanks in no small part to digital advances, it's now easy to get a quick loan these days. We reveal below what lenders and borrowers should look for.

What are the advantages of borrowing money privately??

Private individuals can apply for a loan not only from direct banks, but also from internet banks or so-called "crowdlending platforms. These platforms mediate loans from a lender to a borrower. In contrast to the commercial providers, mainly private providers are active on this platform, who lend their money here quickly and easily. Borrowing money from private lenders has a number of advantages:

  • Obtain credit despite negative schufa: for people who have a negative schufa entry, private lenders are more suitable than banks, as public financial institutions sometimes charge high interest rates or refuse smaller loans in the case of poor payment morale. A private lender is more likely to waive the right to information – especially if the project into which the money is flowing is well described online.
  • More flexible and uncomplicated: a private loan is often much less complicated and can be arranged more flexibly. It is not bound by deadlines or legally stipulated periods and leaves the parties sufficient freedom to agree private arrangements with each other.
  • Transferring money is quicker and easier: those affected have to present and fill out countless papers and applications at the bank before they receive a loan. For private lenders, many of these applications are not necessary and the money can be transferred more promptly.
  • Lower costs and interest rates: private people often charge less interest than a bank for a personal loan.
  • Golden mean between public and private lender: a private lender from the internet often represents the golden mean. On the one hand, this offers the loan at favorable conditions, on the other hand, it ensures a certain anonymity.

Private lenders often offer loans in a more timely manner and with more favorable interest rates.

What are the disadvantages for people who seek a private lender??

Many people are ashamed of their financial predicament, which makes it correspondingly uncomfortable for them to ask others for help. In the private environment (outside of online mediation), this is sometimes the most difficult thing to do. The employees of a bank are obliged to maintain secrecy about the financial circumstances of their customers, this does not apply to private people. Self-employed persons must always conclude a contract when accepting funds. For branch or online banks, this is mandatory; for private lenders, it is not. Often the period of notice is also a problem. In the private sector, the lender is entitled to cancel the loan with a notice period of three months, unless there is a fixed agreed term. The borrower must then repay the entire amount in one go.

Tip: in the case of private financial agreements, it is worthwhile to draw up a written contract including repayment periods. There is no need to involve a tax advisor or a notary public. A sample contract is sufficient to summarize all the important key data. If you take out a personal loan online, you will usually conclude a contract via the corresponding portal.

With a written contract, both parties are legally protected in the event of a dispute.

What interest is charged on a private loan??

In the case of a loan from a private person, the interest rates are negotiable, because these loans do not follow government regulations. For an online platform, this rule does not apply; the interest rates specified there, which are set by the lender, must be paid. The private lender has to record all the interest it earns in the KAP anlage (german tax return).