Handwritten Loans Without Notarization: Are They Legally Valid? What Interest Rates Comply with the Law?
Is Lending Money with a Handwritten Non-Notarized Document Legally Valid?
According to Article 463 of the Civil Code 2015, the asset loan contract is defined as follows:
Asset Loan Contract
An asset loan contract is an agreement between the parties, whereby the lender delivers the asset to the borrower; upon due date, the borrower must return to the lender the same type of asset in the correct quantity and quality and must pay interest if agreed upon or prescribed by law.
Additionally, Article 466 of the Civil Code 2015 stipulates the following:
Obligations of the Borrower to Repay the Debt
1. If the loaned asset is money, the borrower must repay the full amount upon due date; if it is a physical asset, the borrower must return the same type of asset in the correct quantity and quality, unless otherwise agreed upon.
2. If the borrower cannot return the physical asset, repayment can be made in money equivalent to the asset's value at the location and time of repayment, subject to the lender's consent.
3. The repayment location is the lender's residence or place of business, unless otherwise agreed.
4. If the loan is interest-free and the borrower fails to repay or repays insufficiently upon the due date, the lender can demand interest at the rate stipulated in Clause 2, Article 468, of this Code on the overdue amount until payment is made, unless otherwise agreed or prescribed by law.
5. If the loan bears interest and the borrower fails to repay or repays insufficiently upon the due date, interest must be paid as follows:
a) Interest on the principal at the agreed rate for the loan term until repayment is made; if overdue, additional interest as stipulated in Clause 2, Article 468, of this Code must be paid.
b) Overdue interest on the principal overdue amount at 150% of the agreed loan interest rate for the overdue period, unless otherwise agreed.
According to Article 12 of Resolution 01/2019/NQ-HDTP, the handling of overdue repayments in asset loan contracts is outlined as follows:
Handling Overdue Repayments in Asset Loan Contracts
1. If the asset loan contract specifies the handling of overdue repayments, the court will review and decide based on the principle of addressing each overdue instance once.
2. If the asset loan contract includes both penalty for breach and overdue interest on the principal or other forms of penalties for overdue repayment, the court will consider the relevant provisions of the Civil Code, the Law on Credit Institutions, and guiding documents to decide based on the principles in Clause 1 of this Article.
Thus, according to these provisions, the law does not mandate the form of an asset loan contract. Therefore, the borrower and lender can agree on the form of the loan. Consequently, even a handwritten, non-notarized document remains legally valid, and the borrower must fulfill the repayment obligation.
Is Lending Money with a Handwritten Non-Notarized Document Legally Valid? What is the legal interest rate? (Image from the Internet)
What is the Legal Interest Rate for Lending Money with a Handwritten Document?
Article 468 of the Civil Code 2015 regulates the interest rate for asset loan contracts as follows:
Interest Rate
1. The interest rate for a loan is as agreed by the parties.
If agreed upon, the interest rate must not exceed 20% per year of the loan amount, except where otherwise stipulated by related laws. Depending on practical conditions and at the request of the Government of Vietnam, the Standing Committee of the National Assembly decides on adjustments and reports to the National Assembly at its nearest session.
Any agreed interest rate exceeding the specified limit is invalid for the exceeding portion.
2. If the parties agree on interest payment but do not specify the interest rate and a dispute arises, the interest rate is determined as 50% of the limit specified in Clause 1 of this Article at the time of repayment.
Hence, if the lender and borrower are individuals and the loan is documented in handwriting, the agreed interest rate must not exceed 20% per year of the loan amount.
Sample Loan Agreement?
Currently, there is no legal regulation on the form of a loan agreement. A loan agreement will incorporate the terms agreed upon by the lender and the borrower. A sample can be referred to here.
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