Hello All.

I need a small advice from You guys. One of my friends wants to borrow XXXXX EUROS from me. And he wants to pay interest on that loan. I do want to help him out, However I want to be on the safer side by having him keep some kind of security with me, in case his intentions go wrong afterwards.

And I have the following questions :

A. Legally, am I allowed to give such a loan and charge interest on that ? Of course I will declare the interest in my tax decleration at the end of year.

B. Legally, am I allowed to keep some kind of security from him ? Like house papers or jewellery or etc etc.

C. Can I enter into some kind of paper contract with him for doing this ? saying that He is taking a loan from me for XXXXX amount and will pay X% interest on it and then he is keeping XXXXXX with me as security and that he will return the money in XX months. And if he doesnt abide by this contract, then I can do XXXX with his security ( house or jewellery ).

The whole point is that I do want to help him out but of course be on the safer side.

Can anyone advise on what are the possibilites ?

Someone might ask that why doesnt he approach a bank for this loan. Answer being that banks here charge quite a interest on the loan and I am offering him this loan on a very low interest rate, keeping in mind our friendship.

Thanks,
Nitin.

Hello Nitin,

I will lend someone money only if I have trust in him and have been in association with him for the past 10 years.
But let me tell you one incident I have witnessed.
When I joined the UNI in Kassel in 2000, I heard a story of a dubious person.
He seemed to have won the confidence of everyone of his fellow class mates and after 1,5 years, he told them that he needs 25000DM urgently as his family is suffering back in his home country. People were so confident in him that they pitied him and gave him the money.He told them that he has to go to his country to repay back their debts and will be returning back in a month.

He didnt come back at all till date. Finally they found that he didnt even pay his house rent for 5 months in a row, his telefone bill has amounted to around 5000DM for the past 3 months, etc etc etc.

All the people who lost their money were just lamenting and couldnt do anything.

Well coming to you lending him a 5 figure amount, I would say all banks are giving good interests of around 5-7%, which is really reasonable.A person borrowing a minimum of 10000 euros from the bank, will have to pay 10700euros to the maximum including interest.

Well if at all you lend him the money and he takes it away, all you can do is report to the police or Schufa.
But the money lost is always lost.

So beware before taking such a step.

@Chandra

Nice bankman you would be!!! If you borrow money with that interest rate I want to ask you for a couple hundreds of thousand euro boy!!

The interest rate you applied is the interest rate for the Grundschule. The real life is different. Just for curiosity try a link to any bank (I did it but I don´t make free publicity), Kredit, Rechner and you will wake up to reality suddenly.

For 10.000 at 36 months --> 36 x 307 >= 11052
For 10.000 at 72 months --> 72 x 171 >= 12300

In addition they "pollaidly" include insurances and "processing fees" that always raises the amount.

By the way, the old proverb says also that "The banks always lend money to whom doesn´t need it". In normal words, if you need the money you don´t get it!!

If you have the bad luck to be in Schufa, take a look in the "good" newspapers like Bild (they don´t need my publicity so I can name it) and down under in the sex pages you will find hundreds of announces of "Geld ohne Schufa" that have even higher interest rates. Surely you phone and you get the money in the next day but I don´t even imagine in which conditions.

YO,

don't you stop just normally stop a bit above these adds about Geld Ohne Schuffa? :-) Just kiddin' Trying to get in my head that it's Friday 2day :-) and tryin' 2 4get all the last days stress ;-)

D.

Hey Bro

You are happy now because you are planning to send your wife to work and the NoB family will have a lot of money!!!

By the way, congratulations to the EG for her. I think the whole family will soon celebrate in the africant continent isn´t it?

Yep, today is friday but a very bad day because my son last night have sleeped the whole night. So instead of the 2 or 3 hours I normally sleep, I have sleeped about 8 hours. This means that one of my two neurons is still asleeped.

Well, sorry if I offended somebody (any of you are lending money without Schufa isn´t it? )

Hello. My name is sabine. I am a fully qualified lawyer in Germany. Sure you can lend someone money legally and let pay him interest. The amount of the interest depends on the kind of relationship you have. But it should not be too high, not much higher than the current bank interests, otherwise maybe it is immoral “sittenwidrig”. I advice you to include in the contract of loan a “Pfandrecht” or “Sicherheitsübertragung” (lien). Which kind of security you choose depends of the circumstances. With the “Pfandrecht” you will have the things in your custody and if the borrower vanishes and you do not have a current address, it is easier to satisfy your claims.
If you have further questions or you need someone to draw up a contract, write to reeder@trust7.com