Your friend is short on cash — needs 200 euros until payday. He says: “I’ll pay you back in 20 days, please help me out.”
You’re not heartless, but you’re also not stupid with money. So you wonder — can I charge them interest?
Or even better — they offer: “I’ll give you 10% extra when I pay you back.” Is that legal?
Short answer: yes, you can. Long answer: yes, but with some rules.
The Law Says Yes (But It’s Not Dumb About It)
Croatian law (Obligations Act, Art. 26-29) does not prohibit individuals from lending money to each other with interest. Quite the opposite — a loan agreement can include interest and it’s perfectly legal.
Here’s what the law says:
- Contractual interest — you and your friend agree on the rate. That’s your deal.
- Default interest — if you didn’t agree on interest but they don’t pay on time, the law automatically gives you default interest (currently 12.50% per year).
So: the contract is formed the moment you agree and hand over the money. You don’t need a notary, a lawyer, or anything except — strongly recommended — something in writing.
What’s Banned: Don’t Worry, It’s Not Usury
People often think — “if I charge my friend interest, that’s usury and I’m going to jail.” No. Usury (Art. 261 of the Criminal Code) is when someone exploits your difficult situation to impose obviously unfair interest — like 50% per month.
The threshold? If the interest is clearly disproportionate compared to market conditions, a court could void it. But realistic 5-10% monthly on a few hundred euros? That’s fine.
If you want to be safe — use the maximum contractual interest rate that banks can charge (currently around 5-6% per year for cash loans) and you can’t go wrong.
Taxes: Here’s Where It Gets Tricky
And now the part everyone skips — the Tax Administration.
If you lend your friend €200 and they agree to pay back €220, that €20 is your capital income. Under the Income Tax Act, income from interest between individuals is taxable.
Here’s how it works in practice:
- Under €1,000 per year — the Tax Office generally doesn’t chase small loans between friends
- Larger amounts or regular lending — theoretically you should declare capital income (10% tax + surtax depending on your city)
- If you regularly lend money with interest — that’s no longer helping a friend, that’s a business and you need a craft license
In practice? Nobody reports €20 in interest from a roommate. But know that legally — you should.
How to Do It Clean (And Keep the Friendship)
Friendships die over money more often than over betrayal. So:
- Write a loan agreement — by hand, on paper. Amount, repayment date, interest (if agreed). Both sign.
- Document the transaction — bank transfer leaves a trail, cash is harder to prove
- Don’t lend more than you’re willing to lose — because there’s a chance you won’t get it back. That’s reality.
Sample simple agreement:
“I, Mark Horvat, lend €200 to John Perić for a term of 30 days, until August 5, 2026. John agrees to repay €220 (principal + €20 interest). Signed in Zagreb, July 5, 2026.”
What If They Don’t Pay Back?
If you have a contract (or at least messages acknowledging the debt) — you can sue at the municipal court. For smaller amounts (up to €4,000) there’s a simplified procedure, faster and cheaper than you think.
But realistically — for €200? Swallow it and don’t lend to them again. Court costs will exceed that amount.
Bottom Line
✅ You can lend money to a friend with interest
✅ It’s not usury if the rate isn’t crazy high
⚠️ You should declare the interest for tax purposes, but small amounts fly under the radar
📝 Write a contract — it’ll save your friendship
❌ Don’t lend more than you’re willing to lose
And one final tip: if a friend offers you 30% interest on €200 — run. Either they’re desperate and won’t pay back, or they’re a scammer. Neither is good for you. 😄