What is an interest-free loan?

The name says it all; with an interest-free loan you borrow money, without having to pay interest. So you borrow money at an interest rate of 0%. Often you can only get this loan through family or friends.

Drawing up a contract

Drawing up a contract

Even though you borrow money from family or friends with an interest-free loan, there is still something business-like about it. Before you take out the loan, a contract or loan agreement is drawn up. This states that the amount to be borrowed is claimable. You usually repay the loan amount in fixed monthly installments, but it is also possible that you do this in flexible installments. The Tax and Customs Administration carries out checks when it comes to taking out interest-free loans.

Donation

Until 2010, an interest-free loan was not seen as a donation, provided that the amount could not be claimed in one go. Nowadays, an interest-free loan is seen as a gift, whatever interest is charged. If parents lend money to their children, it is financially more attractive to leave the amount to be borrowed in the parents’ account and to donate the proceeds to the children. All amounts up to 5000 euros are subject to exemption.

Impossible at a financial institution

Impossible at a financial institution

It is impossible to take out an interest-free loan with a financial institution. If you borrow money from a bank or other institution, you will not get rid of paying interest. This is because lenders earn their money with this.

Interest-free loan when purchasing a car

Interest-free loan when purchasing a car

Numerous loan forms have been added in recent years. Even if you want to buy a car, there are plenty of options for lending.

If you want to purchase a new car, it is possible to take out an advantageous, so-called interest-free loan. Such a loan is also referred to as a 50/50 deal without interest. You pay half of the purchase immediately and the other half within one or two years, without interest.

Even though it seems as if you did not pay interest with an interest-free loan, this is not the case. This loan is not entirely without interest. The car dealer pays the interest itself, but settles the costs in a higher selling price.

An interest-free loan from businesses

An interest-free loan from businesses

Not only car dealers offer an interest-free loan, you can also purchase an installment product at an electronics or furniture store, without having to pay interest on it. You can usually take out such a loan under certain conditions. This must concern a minimum spending amount. In addition, this loan has a fixed term. The advantage of such a loan is that you can purchase a product for which you actually have no money at that time. After a few months or a year, this loan is often converted into a loan with a high interest rate. So you pay more for your furniture.

How is an interest-free loan to the family treated for tax purposes?

How is an interest-free loan to the family treated for tax purposes?

It sometimes happens that money is given to the children within the family. Often this concerns small amounts and no interest is charged. You often do not charge interest on an amount that you lend to a family member. If you borrow money that does not have any form of interest, the person receiving the money is in favor. Normally when receiving a loan you are obliged to pay interest on the loan amount.

Leave a Reply

Your email address will not be published. Required fields are marked *