Private loans – is it legal? | What to look for in this service

There are many private loan offers on the Internet. We will find both private loan offers and loan companies ads. There is already some dissonance here. In this case, we will try to dispel any doubts and characterize private loans. In addition, we will answer the question of who willingly chooses this type of loan and check whether private loans are legal.

What are private loans?

What are private loans?

Private loans are a product offered by people who are not professionally involved in the provision of money lending services. At this point, the question immediately arises – why are loan companies advertising that they grant private loans? It must be made clear that lenders use the term “private loans” solely for marketing purposes to gain additional customer traffic. Especially traditional banks and non-bank institutions do not grant private loans, which results from the nature of their business. To sum up, private loans are usually monetary amounts made available to third parties by a person with a specific capital or company with a given capital, but with the indication that a specific company does not operate under the Act of 29 August 1997 on banking law, and its activities are not is controlled by the PFSA.

Private loans – for whom?

Private loans - for whom?

It should be made clear that private loans are particularly sought after by indebted people who, due to their negative credit history, would not receive financial support in any bank or parabank. In search of financing, every person, even with poor credit rating, first uses well-known companies on the market. It is only when problems arise that the client begins to look for “no bik” type loans and described private loans, often offered by “mysterious investors”. What’s more, the consumer, whose bailiff collects part of his salary or as part of debt execution, seized things, most often choose private loans as the only chance to deal with financial problems. Is this a good way to beat debt?

The danger of private loans

The danger of private loansPrivate loans - for whom?

Definitely private loans can be dangerous. Two factors generating great risk are involved here. The first impulse is often the client’s dramatic financial situation. Such a person sometimes against all common sense seeks financial support at all costs to “forge” here and now. This shortcut leads in a straight line to the debt loop.

The second factor will be the private offers of unverified persons or entities in the field of granting loans. If someone offers a loan and does not have legal personality, the risk of an incorrectly conducted transaction is enormous. What’s more, in this case, there are often actions that are or are brushing against usury, which is illegal in Poland, about which we will write in the next part of the article. Private lenders are aware that the borrower is in a bad financial situation, which often translates into the ease of manipulation used to propose financing.

What exactly are the pitfalls for a customer seeking private loans? First of all, the biggest risk are online advertisements from companies, and in fact people we don’t know at all. Such companies, taking advantage of the client’s very bad financial situation, agree to grant the loan provided that the borrower accepts high costs, additional fees and commissions. What’s more, the most dangerous offers require financial security. To receive financing, they require a pledge, e.g. of real estate. Such action is extremely risky, because in the absence of timely repayment, the client may lose all his assets. In addition, it is also easy to find existing companies just to prepare a contract in accordance with the law, so that it is very unfavorable to the client as a result.

Is private loan usury?

If we consider the situations described in which the lender imposes interest and commissions on the client that are not compliant with the Anti-Lich Act, that is, “high interest” loans, usury is allowed. However, it should be remembered that dishonest loan companies also secure their business in legal terms. Often, the client has no chance to fight in court with a company that has a well-paid legal base behind it. Therefore, the best solution is simply not to use the services of companies and private individuals not verified by the PFSA or PZIP. The new Anti-Mortgage Act is to further reduce non-interest loan costs and tighten penalties for loan shark operations, so there is no room for money-lending activities that bend the law. 

Private loan from a family

The situation is different for a private loan understood as a loan from a family member or even a loan for a friend. In Poland, a private person without business activity can borrow money. However, you must remember to meet several conditions. If you want to borrow over PLN 500, you must draw up a contract. The tax-free amount is also important. If we borrow more than PLN 9,637 from the family, we must submit the PCC-3 declaration to the relevant Tax Office within 14 days. We present then the document confirming the loan transfer. If we do not complete the formalities, the Tax Office may charge us a penalty of 20% of the sum of the loan. Undoubtedly, a loan from a family member or trusted, loved one is definitely more secure than a private loan from an unknown investor.

Social loans

Private loans can also be understood as social lending, which is quite popular social loans. What does the operating scheme look like? Social loans bring together borrowers and private investors with capital that they can borrow at a specific price. The borrower determines the amount of loan needed as well as the duration of the commitment and the interest rate. The loan is granted on the basis of an auction. Investors pay the capital needed to grant the loan. For this reason, it is certainly not the best solution for people who need money “for now”. Social lending is definitely safer than private loans, because each of the parties to the transaction operates on specially created online platforms that impose specific rules and require the application of appropriate rules.

Private loans – is it worth it?

Carefully consider whether you really want to bear the risk of private loans understood as money borrowed by investors of unknown origin, with specific claims to secure the loan amount. If you have financial difficulties, such a loan can only aggravate your problems and lead to a spiral of debt. We strongly recommend reliable and secure solutions offered . Our experts will help you overcome debts.

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