What are loans between individuals

Loans between individuals have always been with us. In fact, long before banks existed, individuals already left money between us. Throughout history these practices have been seen better or worse according to different times, but in any case it is something that is there and that we cannot ignore.

In this blog we mainly talk about these types of credits, so it would be absurd not to start by first explaining their basic concepts, what they are and how they work. But first of all, we must know a concept that is new and that is the key to the operation of loans between individuals: P2P.

What does P2P mean?

First, let's briefly explain what P2P is. The P2P concept comes from English peer to peer , translated into Spanish point to point . This concept derives from the networks for the exchange of P2P files. There are different applications and protocols to use this type of network whose fundamental principle is to share files or information.

Loans Between Individuals - P2P

At a time when credit is highly restricted and delinquency rates have skyrocketed to 1996 highs, businesses and individuals are looking for traditional margin financing methods.

In this case, it is not about the doubtful quick loans , the unification of the debt or the extension of the mortgage, but a trend that has already spread through Europe and the United States but has still barely set foot in Spain: personal loans between individuals or individuals, from a strictly legal point of view.

This boils down to the fact that an individual can act directly as a bank, lending their money to a third party and obtaining more profit than they currently obtain from their deposits. In order to obtain this, it benefits from platforms that offer the communication and management necessary to be able to make the loans .

Operation of P2P Loans

The operation of these P2P loans is simple. You just have to enter as a user on a website that makes loans between individuals in Spain, as is the case with SEattle Meditation . The amount is specified, the term in which you want to return and the interest that you are willing to pay. From that moment on, the user will receive different proposals from the lenders.

For the lender / investor , you get a higher return on your money than any bank would give you for a deposit. For his part, the borrower gets a loan at a much lower interest than that offered by a conventional financial institution and, on top of that, does not have to face any type of commission. Finally, the intermediary , that is, the web page that serves to contact and carry out a control of the borrower and to verify the information that he provides, for which he charges a commission.

In the end, these systems try to take advantage of the possibilities of interaction offered by the Internet to bypass the traditional intermediaries that until now have dominated the business. Its operation has a lot to do with the rise of social networks on the Internet , since deep down they create a community of alternative lenders.

From a legal point of view , in Spain there are still no specific regulations to regulate this type of loan. They are generally carried out through a private contract in which conditions are set out and which also serves to prove the existence of the loan, which on the other hand has a series of tax implications.

In the international market, Zopa.com , a pioneer in this field, and Prosper.com are the two main players in this newly created market for personal loans. The first operates in five countries and has a database of more than 200,000 users, which shows the growth that this business is acquiring.

3 opinions on "What are loans between individuals"

  1. Good Morning.
    I wanted to ask you a question regarding the taxation of P2P loans.
    If I, as an investor-lender, obtain benefits for the money that I have loaned (as would be expected), how, when and in terms of what should I declare them to the treasury?

    I have read that they should appear as "savings benefits", as if they were the income from a deposit or a paid checking account, but in my experience the withholdings in these cases were always made by the bank, which is not the case in the we lend P2P. Then, I am not very clear how I should record these income from movable capital and the fact that there is still no regulation as such in Spain makes the whole matter a bit uncomfortable even though the idea seems phenomenal to me.

    Greetings and thank you.


      In the INTERESTS of the LOANS BETWEEN INDIVIDUALS, we will explain what the parties involved (borrower / investor) must do regarding them.
      Two variables must be taken into account when making the Income Statement (IRPF) for Loans between Individuals:

      1.- If the loans between individuals (NATURAL PERSONS) and the DESTINATION OF THE LOAN FUNDS are not for making a business investment, NO WITHHOLDING WILL PROCEED.

      2.-If the loan between individuals is for the realization of a business investment then:

      Borrower or person who receives the money.
      -The borrower, when returning the interest, must MAKE a RETENTION of 21% of the total to be returned.
      -You must also prepare a payment letter, Model 123 for the Settlement of withholdings and submit Form 193 of the annual informative summary that consists of Interest paid to the investor and withholdings.

      Investor or Lender

      -The interest received on the loan goes as EARNINGS OF CAPITAL CAPITAL.

      An investor lends € 1,000 for 2 years at 15% interest, with installments maturing in 1 year. The interest payable would be € 150.

      The withholding that the borrower should make is 150 × 21% = € 31.50 Model 123

      The borrower would return € 118.50
      Form 193, which is informative and annual, should state:
      -The retention of € 31.50
      -Interest paid of € 118.50

      The investor in his income statement gives it as Movable Capital Income for the interests received.

      I hope this clears up a bit more on this issue.

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