Debt Consolidation | Borrow Money to Another

Do you ever borrow money from family or friends or have you been asked? Often this goes well, but it may happen that you do not get the borrowed amount back. Moreover, you do not always help the other person by providing a loan.

What should you pay attention to when you lend money? How can you best help? It is important to know why someone wants to borrow from you. Is it about the purchase of a house for your children or a start-up company? Or for someone who has difficulty getting around or is already in debt? The latter brings more risk.

Refusing can be difficult

The better you know someone, the harder it is to refuse a request for money. Yet you can sometimes refuse someone by refusing a loan. For example by looking together at another solution.

How can you help?

How can you help?

It is important to clarify where the money is needed and whether the person can repay the loan. Ask if you can help in another way. A loan can be an indication of bigger problems. Often a loan is only a temporary solution. Try to start the conversation by asking how the financial situation is further. You can support in the following ways:

  • Make an overview together. This is the first step in gaining insight. As a tool you can use the Personal Budget Advice for this purpose;
  • Provides help with arranging the administration;
  • Ask yourself why someone wants to borrow from you and not from the bank;
  • Do not lend extra money if someone already has debts. Help someone get started by referring them to debt counseling. 

If you do not want to borrow

Of course you would like to help your family member or acquaintance. You want to avoid quarrels, financial problems at the other person or wages. Often you help someone by not borrowing money. Borrowing is often a temporary solution. The cause is not removed. Nibud advises lending to someone else if there are financial problems. This because:

  • There is always a risk that the loan will not be repaid. What does this mean to you? Can you really miss the money? Or is there a chance that you yourself will get into financial problems?
  • A loan often only solves part of the problem (temporarily);
  • In case of failure to comply with agreements, tensions between you and your acquaintance may arise;
  • A private loan (a loan without the intervention of a bank) often can not be included in a debt restructuring. That means you have lost your money.

If you want to borrow

If you want to borrow

You agree together how and when and whether interest and repayment needs to be paid. With larger amounts, it is wise to record these agreements in a debt confession or a notarial deed.

Debt Confession

This is a statement in which you write down the agreements. A debt acknowledgment is also useful for smaller amounts. This can also be done via an e-mail, app or SMS. Also think of a receipt or proof of payment of the money. Both parties must sign the acknowledgment of debt. In a debt confession you record the following:

  • Date
  • Name and address of the person who lends the money
  • Name and address of the person who lends the money
  • Amount in numbers and letters
  • Terms of refund
  • Signature of both

Notarial deed

If you lend a large sum of money, for example for the purchase of a house, it is important that you record this at the notary. This can generate tax benefits. Both for you and for the recipient. For example, mortgage interest deduction.