A peer-to-peer loan is a loan agreed directly between two individuals, without going through a bank. It can take the form of a loan between family members or friends, or financing arranged through a matchmaking platform. Once the amount exceeds 1,500 euros, a written agreement is required to formalize the arrangement. This option offers genuine flexibility, but it is subject to a specific legal and tax framework that both parties should understand before committing.
Loan agreement or acknowledgment of debt: two documents with different effects
These two documents are often confused, which can prove costly in the event of a dispute. A peer-to-peer loan agreement is signed by both parties. It sets out the amount, term, repayment terms and, where applicable, the interest rate.
An acknowledgment of debt, by contrast, binds only the borrower. It confirms that a sum has been received and must be repaid. It does not necessarily set a repayment schedule or interest rate.
To protect the transaction, a loan agreement offers better protection for both parties than a simple acknowledgment of debt. It provides comprehensive evidence in court because it bears the signatures of both the lender and borrower and specifies all the terms of the agreement.
Financing a personal project with a Smart PAP peer-to-peer loan requires drawing up this kind of written agreement, clarifying each party’s commitments from the outset.
A notarized deed is optional, but it gives the agreement enforceable status: if the loan is not repaid, the lender can begin debt recovery proceedings directly without first going through a court hearing. This option is worth considering for large amounts or loans intended for real estate purchases.
Tax obligations for peer-to-peer loans: reporting thresholds and tax on interest
The tax implications of peer-to-peer loans are often underestimated. Both the lender and the borrower have separate obligations to the tax authorities.
Reporting the loan to the tax authorities
Any loan with an amount exceeding 5,000 euros must be reported to the tax authorities. The borrower is responsible for filing the declaration, which must be attached to their tax return. Failure to report the loan may result in a tax reassessment, as the authorities may reclassify the amount as a disguised gift.
Tax on interest received by the lender
If the loan carries interest, the amounts received by the lender are taxable income. The lender must include them in their annual tax return.
Interest-free loans between people who know each other are both possible and common, but they must still be reported once the 5,000-euro threshold is exceeded. The absence of interest does not remove the reporting requirement.
Loans through crowdfunding platforms: how the European framework affects lenders
Crowdfunding platforms (crowdlending) offer another type of peer-to-peer loan. Lenders finance a project run by a borrower they do not know personally, in exchange for repayment with interest.
The European regulation on crowdfunding service providers has applied to new platforms since November 10, 2021, and the transitional period for existing platforms ended on November 10, 2023. This harmonized framework requires platforms to disclose the risks of default, late repayment and no return.
However, the AMF has identified specific shortcomings in the information some platforms provide to investors. Recent reviews show that the advertised return does not always reflect the actual risk. Before lending through a platform, checking that it is registered with the AMF or ACPR should be the first step.
One specific crowdlending risk to consider is illiquidity. A crowdfunding loan cannot easily be resold. The money invested remains tied up until the agreed maturity date, even if the lender wants to get it back sooner.
Disputes and non-repayment: practical options for lenders
The risk of non-payment is the direct trade-off for the flexibility of peer-to-peer lending. There are two avenues for recourse, and their effectiveness depends largely on the quality of the original document.
- Amicable debt recovery begins with a formal demand for payment sent to the borrower by registered letter. A judicial officer can be appointed to serve the notice, formalizing the process and paving the way for legal proceedings if the borrower does not respond.
- Judicial debt recovery begins when amicable efforts fail. The lender can bring a claim before the judicial court, provided they can produce the loan agreement or acknowledgment of debt. Without a written document, proof that the loan exists relies on indirect evidence (bank transfers, message exchanges), making the process more complicated and time-consuming.
The strength of the agreement signed at the outset determines how quickly and at what cost the debt can be recovered. A comprehensive loan agreement, with a repayment schedule, late-payment clauses and both parties’ signatures, reduces the average time needed to resolve a dispute compared with a basic acknowledgment of debt.
Peer-to-peer lending remains a useful financing option for projects that traditional banks are reluctant to fund or take a long time to finance. Its success depends less on the amount borrowed than on the care taken in drafting the agreement and meeting reporting requirements. A well-drafted agreement, a tax declaration filed on time and a preliminary check of the platform being used are enough to protect both parties.
