Interest-free loan between private individuals: what it is and how it works

In order to carry out a project, it is often necessary to resort to financing, therefore requesting a loan from a bank or a trusted person.
As many will know, a loan is a contract by which the creditor delivers a sum of money to a beneficiary who undertakes to repay it, with or without interest, within a certain period of time.
In the event that the loan does not provide for the repayment of interest, you are taking out an interest-free or unsuccessful loan, also known as a loan between private individuals or relatives.
Yet, not everyone is clear what the characteristics of the unsuccessful loan are and how to take out it.
It is therefore advisable to know what the peculiarities of the non-onerous loan are, what the law says, what the advantages are and what the guarantees are in case of non-repayment.
Here's everything you need to know.
Interest-bearing loan between private individuals: the complete guide What is an interest-free loan between private individuals: definition and what the law says The types of interest-free loan between private individuals Interest-bearing loan with private deed Interest-bearing loan by letter Non-interest-bearing loan with bank transfer purpose Non-interest-bearing loan guaranteed by bills of exchange How it works the interest-free loan between private individuals? Financing and repayment Interest-free loan contract: what to know and how to draw it up The advantages of the interest-free loan Interest-free loan between private individuals: what happens if the loan is not repaid? What is an interest-free loan between private individuals: definition and what the law says An interest-free loan is a type of loan that does not provide for the application of interest.
This means that the beneficiary will have to pay his creditor only the sum granted to him, as established by article 1813 – which regulates the mortgage contract, the reference model for interest-free loans – and following of the civil code.
This form of financing is used between private individuals, mainly family members, friends, acquaintances, but it can also be used between partners or by small or medium-sized companies in the event that there is an extraordinary need for liquidity.
To date, there are 4 types of non-onerous loan: unsuccessful loan with private agreement; interest-free letter loan; unsuccessful loan with bank transfer reason; interest-free loan guaranteed by bills of exchange.
The types of interest-free loan between private individuals As anticipated, there is not only one form for the non-interest-bearing loan.
In fact, there are 4 types of financing that two private individuals can take out.
Let's see what the differences are.
Interest-free loan with private agreement Using private agreement formalizes the agreement for the unsuccessful loan and represents the recognition of debt.
In the document, in fact, the beneficiary confirms that he owes a certain amount to another person.
This form of loan with attached private document not only acts as a guarantee of the rights and duties of the two parties involved, but is the proof that protects them against the Revenue Agency and the Tax Office, testifying to the existence of the agreement.
The Agency, in fact, could be suspicious of the movements of money passing through the current accounts of those who made the loan and those who are repaying it.
This document shows that the creditor does not receive interest on the repayment of the loan, which would result in the payment of related taxes.
This form of interest-free loan is the one most recommended by experts as it prescribes the methods of disbursement, repayment, guarantee and sum of the loan.
Interest-bearing letter loan An interest-free letter loan is a type of financing between private individuals in which the loan contract is drawn up by one of the parties (creditor or beneficiary) and sent by post to the other.
Once the document has been viewed and signed, the latter sends it back to the sender.
One of the advantages of this type is that it does not require registration or the payment of a registration tax, so it is preferable to use it in the case of modest amounts.
read also Direct and indirect taxes: what they are, what they are and the difference Interest-free loan with bank transfer reason The non-onerous loan can also be disbursed via bank transfer.
A type highly recommended by experts as the bank document acts as proof of the private loan and is a highly transparent and traceable tool, which is why it is the preferred tool for repaying a loan.
For this reason it is essential to pay extreme attention to the reason for the transfer, in which the purposes and terms of the loan must be clarified with extreme precision.
In the reason for payment, in fact, it is necessary to detail the money transfer operation, specifying that it is an "interest-free loan." In the case of repayment, in the same way, it will be necessary to recall the details of the agreement, inserting the wording "repayment of the loan".
Interest-free loan guaranteed by bills of exchange The bill of exchange is a credit instrument whose typical function is to postpone the payment of a sum of money to a specific deadline.
This, therefore, acts as a guarantee for the loan between private individuals.
It must be remembered that for the issuance of the bill of exchange the payment of stamp duty equal to 12 per thousand of the amount is required.
In light of this cost, the bill of exchange guarantees the creditor greater security and protection in the event of the debtor's insolvency, offering the possibility of requesting forced execution in the event of non-payment.
read also Promissory note loan: what is it, how does it work, is it worth it? How does the interest-free loan between private individuals work? Financing and repayment Unlike what happens with a traditional loan, provided by banking institutions or finance companies, the procedures for obtaining, repaying or recovering an interest-free loan are simpler.
And this is because the methods of disbursement and repayment of the loan are based on agreements freely agreed between the parties.
For example, the parties can establish a specific duration for the loan and the repayment methods, whether in a single solution or in several installments.
The procedure can therefore vary according to the needs of the creditor and the beneficiary.
However, there are rules that must be respected in order not to violate anti-money laundering regulations.
First of all, the sum lent must correspond to the sum to be repaid – as we are talking about an interest-free loan – otherwise the loan could be classified as usurious.
Furthermore, the money transfer must be traceable.
To date, according to anti-money laundering regulations, the maximum limit for transactions for which cash payment is permitted is 5,000 euros (art.
49, paragraph 3-bis of Legislative Decree 231/2007).
Loans exceeding 5,000 euros, therefore, must be made with traceable instruments such as bank transfers or checks.
Interest-free loan contract: what to know and how to draw it up Deciding to stipulate a contract for an interest-free loan is not synonymous with a lack of trust in a relative or friend, but rather a way to protect both parties.
In fact, by resorting to private writing the agreement is formalized, clarifying the conditions that regulate the loan.
Many, however, decide to give up on signing the contract because they think it is mandatory to contact a notary (with the necessary associated expenses).
In reality this is not the case.
Italian law, in fact, allows the validity of an interest-free loan contract even if drawn up privately, without the need for notarial authentication.
However, the choice to contact a notary can present some advantages, above all greater security for the regularity of the contract.
If you opt for a private agreement, it is good to know what are the essential elements that must be present.
The document must specify: that the loan is interest-free, i.e.
that the creditor does not require interest; the personal data of the creditor and debtor; the amount lent, specifying the occasional and temporary nature, purpose and duration of the loan; the certain date validated at a post office, postmark, via the Revenue Agency or PEC; delivery plan; repayment method (in a single solution or in several installments).
The document must also include the words "mortgage contract drawn up according to the rules set out in art.
1813 cc et seq.", where any guarantees chosen by the parties – guarantor or mortgage – will be specified.
The private agreement must be drawn up in duplicate with the handwritten signatures of the beneficiary and the creditor.
However, it is advisable to register a third copy with the Revenue Agency, in order to demonstrate the regularity and correctness of the money movements in case of investigations or checks by the Tax Authorities.
If the document is registered, you will have to pay: the stamp duty of 16 euros for every four sides of the contract; the registration tax of 3% of the amount lent, to be paid within 20 days from the date on which the deed was stipulated.
read also Asking for a loan: how to do it, requirements and necessary documents The advantages of the interest-free loan Before asking for a loan from a friend, relative or partner, it is good for the beneficiary and the creditor to know what the advantages of an interest-free loan are.
First of all, the fact of personally knowing the other person, whether creditor or beneficiary, should reassure both parties, as thanks to dialogue a solution suited to the needs of both can be reached.
But let's get to the factual and objective side.
According to experts, among the main advantages of the interest-free loan we find: savings on interest, the main advantage.
A loan between private individuals provides for the repayment of the capital only, without interest or any other type of income; greater flexibility.
The conditions of the interest-free loan, such as the amount, duration and repayment methods, can be freely agreed between the parties, without the intervention of intermediaries; the disbursement of the loan does not require opening or management costs for the application; the sum disbursed is not subject to taxation and does not require taxation and therefore will not have to be included in the tax return.
Interest-free loan between private individuals: what happens if the loan is not repaid? First of all, if you are granting a loan, even if to a trusted person, it is always best to formalize an agreement through private writing.
Thanks to this document it is possible to prove the unsuccessful loan between private individuals.
After requesting the balance of the loan, the creditor only has to request an injunction from the Court.
A rapid procedure which can only be requested if the creditor is able to demonstrate the existence of the loan, and which allows an enforcement order to be obtained against the debtor.
If a private agreement has not been drawn up, it is a good idea to look for evidence, such as the receipt of the bill of exchange or bank transfer.
If the debtor does not comply with the injunction, the creditor can initiate forced execution, thus proceeding with seizure to recover the credit.
read also Non-repayable loans: what are they and how do they work?