Lending – what is it and how it differs from a loan

Lending is a form of transferring a given item to another person for a specified period of time. This transaction is free, so neither party bears the cost of borrowing. It is worth making a loan agreement so that there is no misunderstanding when it is terminated. Remember that we can use not only the premises, but also a car. Then it is worth writing a car rental agreement in which the operating conditions will be determined.

What is a loan?

What is a loan?

Lending is giving someone something that usually belongs to us for a certain period of time. Handover is for free, which is the opposite of e.g. rent.

The terms of the loan are in art. 710 of the Civil Code, which says: “By the lending agreement, the lender undertakes to allow the recipient, for a definite or indefinite period, to use the goods given to him for free.”

Lending is often mistaken for a loan, which applies to e.g. a loan secured by non-bank institutions. Let’s pay attention to the provisions, especially when signing contracts.

Lending agreement – parties to the agreement, subject and duration

Lending agreement - parties to the agreement, subject and duration

When lending someone an item, it is worth making a contract that includes the terms of the transaction. Although the lending is free, it is worth indicating in the document, e.g. in what state the item was transferred to another person. Remember that we do not have to be the owners of the item that we lend.

The loan agreement may be concluded orally. However, it is worth making it in writing, as is the case with a loan agreement from non-banking companies. The loan agreement should include information on:

  • parties to the contract, i.e. persons transferring the item in question;
  • the lending period, i.e. the time for which the item was transferred to another person;
  • the subject of lending, that is, the thing transferred to the other person and his condition.

Lending and tax

Lending and tax

It is good to know if you have to pay tax on someone or if you have a loan, which is an obligation when you apply for one of the many types of loans – a family loan.

The loan agreement is not subject to tax on civil law transactions. The person taking possession of the item usually bears the cost of maintaining the borrowed item (e.g. buying fuel for a car). These costs are not reimbursed by the lender. If a larger and expensive breakdown has occurred, the cost of repairing it should be consulted with the lender.

However, we should remember that if we lend something to a person who is not a member of our family, we must pay personal income tax and the contract must be shown in the annual tax settlement.

Termination of the loan agreement – conditions?

Termination of the loan agreement - conditions?

The loan agreement expires on the day that was set out in the contract when the recipient uses the item in the manner specified in the contract or the time in which the item could be used ends. At the end of this period, the item must be returned. If it is appropriated, the case goes to court.

There are situations when a lent item can be returned earlier than the contract assumes.
This occurs through the termination of the contract, which is somewhat reminiscent of the termination of the loan agreement. However, this is definitely faster and can occur when:

  • the item is used contrary to its purpose and in a manner contrary to previous arrangements;
  • the recipient gave the subject of the contract to a third party, without prior agreement with the owner;
  • the lender will ask for the return of the item, because it becomes necessary for reasons not provided for in the contract.

Car rental agreement – when?

Car rental agreement - when?

Young drivers who do not yet need to buy a car or do not know which car to choose, can borrow it. A car rental agreement will be useful for this. Terms of lending should be established, i.e. information about which car will be lent and for how long.

Remember to describe the current condition of the vehicle in detail so that there is no later misunderstanding at the end of the contract and return of the loan. Let’s be aware that we don’t have to be the legal owners of the things we want to lend to the other person.

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