- General

How to be a private money lender

We receive many letters from readers who, to put it simply, have been cheated by friends, former friends, neighbours and even family members who borrow more or less money from them. In many cases, the mistakes made when borrowing cash are decisive for subsequent problems in recovering the cash. Often lenders limit themselves to verbal assurances, not taking care of proper security of loan repayment.

It is not worth taking the word for it

Through the loan agreement, the lender undertakes to transfer a certain amount of money or items marked only by species to the borrower, and the borrower undertakes to return the same amount of money or the same amount of items of the same species and quality. The provisions of the loan agreement in the Civil Code are “sparse” and contain only a few provisions (Articles 720 – 724 of the Civil Code).

However, it is particularly worth remembering Article 720, paragraph 2 of the Civil Code. It stipulates that the loan agreement, the value of which is to be transferred PLN 500, should be confirmed in writing. Although it does not provide for the rigour of nullity and a loan of a larger amount will be effective, there may be problems with enforcement of the money if it is not repaid. Why? Reservation of written form without the restriction of nullity results in the fact that in the event of not maintaining the reserved form, neither evidence from witnesses nor evidence from the hearing of the parties for the fact of performing an action is admissible in a dispute (Article 74, paragraph 1 of the C.C.P.). Therefore, the presence of a witness at the granting of a larger loan does little to improve our situation. To this end, at least a simple written receipt from the borrower should be withdrawn. If the fact of concluding a contract is probable by means of a letter, evidence from witnesses or evidence from hearing the parties will be admissible in a dispute (Article 74, paragraph 2 of the C.C.P.). Similarly, if both parties agree. This unanimity, however, cannot be relied on very much.

However, the provisions on written communications provided for as proof shall not apply to legal acts in relations between traders. This means that an entrepreneur who lends at the word of another entrepreneur an amount greater than PLN 500 will be able to prove the fact of concluding a contract with the help of witnesses or evidence from the hearing of the parties. Read more here

Safer on account than at hand

Even if a contract is concluded in writing, it sometimes happens that the other party, despite receiving the loan object, claims otherwise, i.e. that it has not yet received the money from us. It is worth protecting ourselves against such a development, e.g. by deciding in the agreement that the money has already been spent, and in the event that this happens later, by taking away the relevant receipt.

More and more often, however, instead of “hand to hand” transactions, the subject of the loan is released in a non-cash form – by bank transfer. This is also reflected in the contracts in which the bank account numbers of the contractors are entered. It is worthwhile to move forward and use this form of settlement of accounts. Then it will be easy to prove that the money has been transferred to the borrower.

It is good that the loan should also be repaid by bank transfer. If a loan agreement obliges the borrower to make a non-cash transfer of money (e.g. a transfer to the lender’s account), this almost eliminates the risk of unwarranted refusal to repay the loan due to alleged early performance.

Think about safety features

Well, the agreement will be concluded in writing and will specify the parties, the manner and dates of issuing and returning the subject of the loan, since after the judgment awarding our claim, the enforcement proceedings conducted by the bailiff may prove ineffective. In one of the letters, the Reader writes that the execution initiated after the judgment in absentia against a former friend who lent and did not return PLN 30,000 has stalled due to the fact that the debtor left the country without leaving any property in place, and that his current place of residence is unknown.

Therefore, it is worth thinking in advance about this type of danger and properly securing the repayment of the loan. This can be done in many ways, but some of them (such as a bill of exchange or submission to a notarial deed) only shorten the path to enforcement. That is a lot, but it may not be enough. It is better to obtain someone else’s guarantee for the borrower’s debt or to collect a valuable item of movable property as a pledge. For larger amounts it is also possible to try to establish a mortgage on the borrower’s property.


Most often, the repayment of a “private” loan is secured by a guarantee and a pledge. By the guarantee agreement, the guarantor undertakes to perform the obligation towards the creditor should the debtor fail to fulfil the obligation. Importantly, the guarantor’s statement should be made in writing – otherwise it will be invalid. Unless otherwise specified, the guarantor shall be liable

About June P. Larose

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