Borrowing from the family is a very common practice. It is usually faster, less formalized, and cheaper than a bank loan or a loan from a loan company. On the other hand, possible quarrels over money and ambiguities can sometimes even lead to long-term conflicts. Therefore, the family loan agreement is written more and more often, especially in the case of large sums. It is not a sign of distrust, but a way to protect the interests of both parties. What do you need to know about it?

Private loans are regulated by law

It will not surprise anyone that loans from loan companies, as well as loans from banks, are strictly regulated by law. However, many people do not realize that there are also rules for private loans, whether they are granted between family members, friends, or even strangers. The terms and conditions related to granting and taking private loans are specified in the Civil Code.

We must remember that ignorance of the law does not exempt from obeying it. Granting loans to your family may require more formalities than we think, and failure to comply with legal regulations may have unpleasant consequences for us. The law does not specifically define something like a family loan, while relatives can count on some benefits over private loans between strangers.

When is a family loan agreement necessary?

Private loans are very often concluded verbally, but it must be noted that if they concern amounts exceeding PLN 1,000, the documentary form is required. This does not mean, of course, that the family loan agreement cannot also apply to smaller amounts.

A contract is a very valuable tool for resolving disputes, be it among themselves or in court. If it is properly constructed and both parties had time to read it before signing it, it allows avoiding disputes over the repayment date or the amount of possible interest. Its very existence can motivate the debtor to pay the debt, unlike a poorly formalized loan concluded orally.

Family loan agreement – termination and withdrawal

The termination of the loan agreement takes place at the will of the creditor and it means that he demands the return of all funds due to him within a specified period. The notice period is often specified in the loan agreement and it may be, for example, three months, but if it is not explicitly stated in the agreement, the statutory 6 weeks is assumed.

The reason for the termination of the contract is most often the debtor’s failure to pay his obligations. The exception is when the lender knew or could easily learn about the borrower’s poor financial condition at the time the loan was granted.

Withdrawal from the contract is a privilege of the borrower, which he can use within 14 days of its conclusion without giving any reason. In this case, it is necessary to immediately return the borrowed capital, along with interest for the several or several days for which the borrowed funds were in our possession.

The tax on civil law transactions also covers private loans

The tax on civil law transactions, commonly known as PCC, can be associated primarily with donations or sales. However, its payment is also required in the case of private loans – including those we have granted to family members, but there is a certain exception in this regard.

The basic PCC rate is 2%. If in the last 5 years, we have not borrowed more than PLN 9,637 to a person who is a member of our immediate family (including a sister or brother, parent, grandfather, or grandmother), we do not have to pay tax. It is possible to avoid the need to pay tax even after this amount is exceeded, but in this case, it will be necessary to meet several conditions. This loan:

must be backed by a loan agreement;

its amount should be transferred not in cash, but to a bank account or an account at  SKOK, or via postal order.

Moreover, the PCC-3 form must be completed and submitted to the Tax Office appropriate for the place of residence within 14 days from the conclusion of the contract.

Failure to inform the Tax Office about the conclusion of the loan agreement and pay the PCC tax, if applicable, may result in the imposition of a penalty on us in the form of an increased tax rate, so it is not only illegal but also very expensive.

What should the family loan agreement look like?

There is no specific model for this type of contract. Each family loan agreement may be slightly different, but some elements should always be included. Thanks to this, it will be legible and understandable, which will avoid any mistakes or inaccuracies. It is specifically about:

  • place and date;
  • personal data of both parties to the contract;
  • loan amount, interest, and other fees (private loan can also be provided for free);
  • the amount of the total amount to be refunded;
  • the date of return of funds (as well as the method and place of payment, e.g. bank account number);
  • period of notice.

The contract should be signed by both parties in person. It is also worth including an entry according to which in matters not specified therein, the rules contained in the Civil Code will be adopted.

Family loan agreement – summary

Family loans, even for large amounts, are often made verbally, either because no one has thought of writing a contract or because it would be considered evidence of a lack of trust. In practice, the agreement not only provides security for both parties in the event of a possible conflict but may also be legally required, so it is worth remembering. It is not difficult to write it down and you can do it yourself, there are also many ready-made patterns.