The dangers of loans between individuals
Private loans are an additional financing alternative that you can consider when you are spending a financial hardship and need cash.
In Asian culture they are extremely normal.
Less so in the West, despite the fact that lately they have become increasingly well known due to problems in obtaining financing through the financial framework.
In this article, we will clarify precisely what credits are produced between people, how they work, what could be the cost of your loan , how they are addressed and, most important of all, why they can be dangerous for the holder of account.
What is an advance between people?
As its name suggests, an advance between people is close to an advance that occurs between people, without the mediation of any ordinary monetary organization, for example, a bank.
The person who lends the cash can be a companion, a relative or a stranger that we know nothing about.
The mechanics of these types of advances are fundamentally the same as that of a typical mortgage: a landlord lends a specific amount of cash to an account holder and the latter agree to pay it back, along with their related enthusiasm, within a specified time frame.
What attributes does a credit have between people?
The cost of financing related to credit can be exceptionally low (and even zero) in the possibility that it is a companion or a relative who lends us the cash.
Despite what might be expected, if the lender is an outsider, the premiums that they will undoubtedly request will be much higher than those that we can discover in the financial market.
Why are private loans so dangerous?
Further, loans between individuals are one hundred percent legal and have been around since the origins of civilization.
There have always been rich people who, in exchange for interest or commission, have loaned money to others in need.
Currently, if the loan is personal , it is regulated by Law 16/2011 of June 24, while if it is a private loan with a mortgage guarantee, it is necessary to resort to Law 2/2009 of March 31.
Whether it is a personal loan or a mortgage loan , the ideal is that the agreement is presented to the public, that is, that we sign it before a notary. This is the best guarantee for both parties to have their back covered if a problem arises in the future.
In summary, we are faced with a loan with a high economic cost and whose repayment term is shorter.
In addition, it is not guaranteed by the Bank of Spain , so the risk for the debtor is even greater.
Our advice is that before signing it, be very clear about all the conditions that appear in the contract, as well as the obligations that will arise as a result of it.
In the latter case, you can also request a subscription, which in the case of a mortgage loan will be the home.
So again, the repayment term for these credits is not as frequent as the time that a conventional money-related organization could grant us, so your repayment could become increasingly tangled.