Lender

In any lending relationship, there are two parties: one that borrows money and one that lends money. These parties are called the borrower and the lender respectively.

A similar relationship exists in buying and selling, where the person or company buying a product (the customer) is called a debtor, while the seller is called a creditor. If a company sells on credit or chooses to lend money or goods to a debtor, it becomes a lender-borrower relationship.

In this section, we focus on the lender.

The typical lender

The typical lenders in Denmark are banks, finance companies and mortgage banks, which make up a large part of the market when Danes need to finance their house, car or consumption.

Of course, it's not only banks and mortgage companies that can be lenders - a lender relationship also occurs when an individual or private company chooses to lend money or assets to a borrower.

3 tips for first-time lenders

Many first-time lenders often make mistakes - mistakes that are rarely a problem, but can become a problem if the borrower fails to pay back all or part of the loan.

1. Never lend money you can't afford to lose.
2. ALWAYS create a promissory note.
3. If you are unsure about the process, contact an advisor/lawyer.

Remember to create a promissory note when you become a lender

Whether you are a professional or private lender, our clear recommendation as a debt collection company is that you always create a promissory note when lending money to a borrower.

The promissory note is a legal document that details the loan and all relevant information about it.

The promissory note ensures that both borrower and lender have a documented basis for the loan.

In addition, the promissory note gives you as a lender better rights in the event of debt collection if the borrower does not pay. The promissory note can often be used as documentation when starting the debt collection process with a debt collection agency or lawyer.

Template for a promissory note

At Collectia, we have over the years unfortunately seen far too many lenders who did not have the necessary documentation in place around one or more loan relationships.

Documentation of the debt is essential for you as a lender - among other things, to ensure the best framework if the borrower does not pay.

This documentation should be secured through a promissory note, for example.

We have prepared a template for promissory notes that you can download free of charge here.