Does the Loan Have to be Interest-bearing?
In life it is perverse – sometimes it happens that you have to “organize” a large sum of money, and at the same time you do not want to borrow a high percentage in banks and loan companies. Then there is an option to incur free-of-charge obligations for zero percent – not only for friends and family, but also for the first loans offered by some financial entities. What is worth knowing about a loan without interest?
We are happy to borrow, we are reluctant to return
The fact that interest in loans has increased in the last few years – you do not have to prove to anyone. This situation is affected not only by the shorter waiting time for the decision, but above all by the introduction of the anti-usury law of March 11, 2016, which finally regulated the activities of loan companies and introduced legal order – protecting consumer interests. This amended The Act on Supervision of Financial Market 1 hit the dishonest lenders with the greatest force, who viewed the colossal costs of the offered products.
That is why, thanks to the introduced changes, the Poles gradually began to gain confidence in non-bank loans. From statistics The National Debt Register carried out in the second quarter of 2018 shows that – every fourth citizen is in a difficult financial situation, and every tenth is not enough for basic needs. At the same time, ¼ of people declare that the income obtained is sufficient for their current errands. After all, the number of debtors in the KRD database in the last three years has increased by 19%, which in comparison to 2017 is a jump of five points up. In turn, 22 percent. the respondents admitted that they have a worse financial situation than last year. As the main reason, above all, higher costs of living and low earnings were mentioned. However, 15 percent. The Poles openly stressed that they have more money in the home budget, thanks to repayment of outstanding liabilities in the form of loans and loans 2.
Interest-free loan – does it exist?
What does the law say about non-interest obligations? According to art. 720 of the Civil Code – a loan does not have to be interest-bearing! As a consequence, the interest is due to the lender only when it is explicitly provided for in the contract. Usually – this type of commitment is a paid form. Therefore, benefits in the form of interest-free interest are treated as a result of receiving by the Consumer, the so-called unpaid benefit. This also applies if the loan was concluded on a private road by natural persons who do not conduct any business activity. Let us remind you that, in accordance with art. 359 of the Civil Code, the maximum amount of capital interest – in the case of an interest-bearing loan may amount to no more than 10 percent. on a yearly basis. However, when interest is charged on the basis of a higher rate, maximum interest is also calculated. In turn, when the parties specify in the contract that the liability is interest bearing, but they do not indicate how it will be due to statutory interest – which currently amount to a maximum of 5 percent. on an annual basis 3.
Write or not write down?
Until recently, it was also stated that a loan worth more than PLN 500 must be written in writing. However, from 8.09.2016 as a result of amending the Act, this provision has changed – both as to the amount and form. Item 2, art. 720 of the Civil Code emphasizes that the loan in question, the value of which exceeds one thousand zlotys, must be made in the documentary. In addition – through a loan agreement, the borrower undertakes to transfer to the owner of the recipient a certain amount of money or things marked only for the species, and the taker undertakes to return the same amount of money or the same amount of the same species and the same quality 4.
In practice, however, many loan agreements, not only between loved ones, but also in the course of trade, take the oral form! Of course, such a solution is equally important – but it is associated with a high risk of non-recovery! Why? Because the lack of the required document is not possible to carry out an effective investigation. Nevertheless, art. 74 of the Civil Code confirms that failure to keep written, documentary or electronic form provided for the purposes of evidence witness from testimonies or from hearing parties is admissible, if both parties agree, the consumer asks the dispute with the trader or the fact of making a legal transaction is substantiated using document 5.
Interest-free loan as the “first loan for free”!
One of the popular elements of loans without interest is free loans online for new customers. These types of obligations – customers give back in the amount they borrowed. Provided that the indebtedness is paid within the set time! Therefore, before making the final decision as to the choice of the lender – it is worth familiarizing yourself with the offer of at least several entities. Pay attention to exact repayment terms, fees, as well as other additional costs.
Free loan as a form of commitment from family and friends
Many people also decide to help relatives, or entities – who are not professionally related to granting loans. In this situation – although the conclusion of the contract may take place on less formal land, often this type of liability is subject to taxation, a tax on civil law transactions, so-called PCC, as well as personal income tax, or PIT. This is precisely defined in art. 720, according to which the loan is:
- Agreement in which changes occur within the ownership right to the subject of the contract,
- Consensual agreement (concluded by agreement of the parties) and bilaterally binding,
- The sides of the loan are giving a loan, the so-called a lender, as well as taking a loan, or a borrower,
- There is no reciprocal agreement – because the return of the same amount of money is not equivalent to the loan giving service – even if the contract was concluded for consideration,
- The subject of the commitment may be money or things marked, as to the species (then specify their type and amount),
- The key element of the loan agreement is the obligation to return it! Without this determinant you can not talk about the contract! 6
There are exceptions from PCC!
Under the provisions of the Act on tax on civil law transactions – the loan agreement is usually subject to 2 percent. taxation. However, when the lender is a company that deals with loan services on a daily basis, it is exempt from this obligation! Thus, the need to pay PCC only occurs in the case of private entities! But also from this there are some exceptions. Exempt from PCC tax are people who lend loans to PLN 9,637. This is the upper amount of the liability for a maximum of 5 years. They can be provided, including by spouses, descendants, ascendants, stepchildren, siblings, son-in-law, daughter-in-law, stepmother or in-laws. Interestingly – a similar option does not exist, in the case of a loan between the parents-in-law, son-in-law and daughter-in-law. To be able to take advantage of unlimited liability, it is necessary to:
- Submitting a declaration regarding a tax on civil law transactions to the tax authority – within 14 days from the date of the act,
- Documentation of the borrower’s receipt of money: to a bank account, account maintained by a cooperative savings and credit union or sent by postal order.
Loans from friends – are there interest-free loans?
The situation is different in the case of loans from friends. Here, according to art. 9 of the Act on tax on civil law transactions, the exemption from taxation occurs as a result of:
- Granting a loan of up to 5,000 PLN 25,000 for several people, obtained within 3 calendar years,
- Borrowing by entrepreneurs who have their headquarters outside the Republic of Poland,
- From cash registers or company funds, trade union funds or employee relief and loan funds
- Other special purpose funds developed by way of the Act
- The shareholder (shareholder) granted to the capital company 7
In turn, the private loan will go to the annual PIT declaration of private persons – only if it is interest-bearing! According to art. 30a of the Personal Income Tax Act of 26.07.1991 – a 19% flat-rate income tax on interest on loans is charged on a revenue of 19%, with the exception that lending is a subject of economic activity 8. Therefore, it does not force the lender has to submit a tax return, as well as a tax on this.
Is a loan without interest safe?
The answer to this question is the same – as in the case of borrowing loans or interest-bearing loans. In a word – it is safe, but on condition that the client takes it from a reliable and credible lender. Ba – even if it raises trust and all signs in the sky say that you could not get it before signing the contract, it is worth to read the agreement and the terms on which the loan will be granted! Firstly – it will allow you to check the records that are unfavorable for the payer and, secondly, it is a chance to become acquainted with possible costs.
Therefore, when any of the provisions raises doubts, it is unclear and not very transparent, it is worth considering the meaning of borrowing. Currently, there are a lot of lenders on the non-bank market offering attractive loan terms. However, equally important as the reliability of financial entities is also the client’s duty. Because if it does not settle the entire liability on time, the interest-free loan will become a loan with interest and additional costs. And this certainly does not work for the benefit of any debtor.