Loans between individuals are a financing option through which an individual or individual makes a loan to another individual or individual, without the involvement of any bank, financial entity or credit institution.
Thus, who makes the loan can be a friend, a relative or a stranger. However, the mechanics of this type of loan is very similar to that of a common loan, so that, as with other loans, the borrower is obliged to return the amount borrowed with a series of interests to the lender in a term of determined time.
When should you resort to a loan between individuals?
One of the main characteristics of loans between individuals is that they have a very low and even zero interest rate . This makes them more economically advantageous than loans granted by banks or credit institutions, where interest is usually very high and a guarantee is usually requested to guarantee that the borrower will be able to repay the loan in full and comply with the rest of the obligations.
Loan repayment terms
In addition, loans between individuals have a much longer repayment term than any traditional bank or financial institution can offer us, where the loan repayment terms are much shorter.
Thus, it is clear that, given a bad economic situation, where the borrower needs money and does not have sufficient economic capacity to be granted by a financial or banking entity, loans between individuals can be a good financing option .
Advantages and disadvantages of loans between individuals
Although loans between individuals have a series of undeniable advantages – among which are low interest and the long term of repayment of money – they also have a series of disadvantages that make them, sometimes, dangerous.
In any case, we must take into account that loans between individuals are regulated by Law 16/2011 of June 24 , although this does not guarantee that neither party complies with their respective obligations. Thus, these types of loans can pose a high risk to the lender. You can end up facing the risk that the debtor will not return the loan.
How to reduce the risks involved in these types of loans? Undoubtedly, it is best to raise this type of loans to a notary public , so as to guarantee that both parties will fulfill their obligations and that, if they fail to comply, they can claim compliance with the obligations.
In any case, the best option in having the services of a financial comparator, where we can see the types of loans that are offered to us in the financial market, so that we can decide the most appropriate according to our needs.