Are people under 18 years old in Vietnam eligible for a loan? What are the lending and borrowing rules in Vietnam?

Regarding this matter, LawNet would like to answer as follows:

1. Are people under 18 years old in Vietnam eligible for a loan?

According to Article 7 of Circular 39/2016/TT-NHNN amended by Article 2 of Circular 06/2023/TT-NHNN, regulations on eligibility requirements for a loan are as follows:

- If that customer is a legal person, it must have civil capacity in accordance with the civil law jurisdictions. 

- If that customer is a natural person, (s)he must be aged exactly 18 years or older and have full capacity for civil conduct in accordance with the civil law jurisdictions, or must be aged between exactly 15 and nearly 18 years and must not have his/her incapacity or restricted capacity for civil conduct as provided by laws.

- Demonstrate that customer’s demands for a loan to be used for legally accepted purposes.

- Establish that customer’s plan for effective use of borrowed fund.

- Prove the customer’s sound financial capability to repay debt owed.

Thus, people under 18 years old apply for a loan if they must not have his/her incapacity or restricted capacity for civil conduct as prescribed in Articles 22 and 24 of the Civil Code 2015. At the same time, the following conditions must be met: such as the purpose of the loan, financial capability to repay debt owed and plan for effective use of borrowed fund.

2. What are the lending and borrowing rules in Vietnam?

According to Article 4 of Circular 39/2016/TT-NHNN stipulating lending and borrowing rules:

- Lending transactions between a credit institution and a customer shall be performed according to an arrangement between that credit institution and customer and in conformity with regulations laid down in Circular 39/2016/TT-NHNN and other relevant laws, including the legislation on environmental protection.

- The customer borrowing fund from the credit institution shall be bound to use these loans for the right purposes as stated in advance, make repayment of principal and interest amounts due within an agreed repayment period.

3. What are regulations on loan interest rate in Vietnam?

According to the provisions of Article 13 of Circular 39/2016/TT-NHNN amended by Clause 4, Article 1 of Circular 06/2023/TT-NHNN, regulations on loan interest rate are as follows:

- A credit institution and its customer shall agree on the interest rate depending on capital demands and supplies on the market, loan demands and creditworthiness of customers, unless otherwise stipulated by the State Bank's regulations on the maximum interest rate set forth in (*).

(*) If the customer has been rated transparent and healthy in its financial status by the credit institution, the credit institution and the customer shall agree on the interest rate on short-term loan in VND which shall not exceed the maximum lending interest rate decided by SBV’s Governor over periods of time in order to meet certain demands for borrowed fund as follows:

+ Loans taken out to support the agricultural and rural development sector under the Government’s regulations on credit policies for agricultural and rural development;

+ Loans taken out to implement the export business plan in accordance with the Law on Commerce and its instructional documents; 

+ Loans taken out to finance business activities of small and medium-sized enterprises under the Law and the Government’s regulations on support for development of small and medium-sized enterprises;

+ Loans taken out to develop ancillary industries under the Government’s regulations on development of ancillary industries;

+ Loans taken out to finance business operations of enterprises that apply high technologies included in the List of prioritized high technologies approved by the Prime Minister and other high-tech enterprises under the provisions of the Law on High Technology and its instructional documents.

- Terms and conditions of an agreement on the interest rate shall comprise interest rate levels and methods for calculating the interest rate on a loan. 

+ Where the interest rate is not converted into %/year and/or the method for calculating the interest rate based on the actual outstanding amount of debt and time length of maintenance thereof is not applied, the loan agreement must include terms and conditions of the interest rate converted into %/year (one year is calculated as three hundred and sixty five of days) according to the actual outstanding amount of debt and time length of maintenance thereof.

- If a customer fails to repay or fully repay the agreed amount of loan principal and/or interest at the payment due date, the customer shall be obliged to repay loan interest as prescribed hereunder:

+ The amount of interest on principal is charged at the agreed interest rate in proportion to the period during which repayment of that principal due has not been made;

+ If a customer fails to make due payment of interest as prescribed by Point a of this Clause, that customer must pay late payment interest charged at the interest rate agreed upon between the credit institution and customer which is not allowed to exceed 10%/year interest rate on the outstanding balance of late payment interest in proportion to the period of late payment;

+ Where a debt has become delinquent, the customer owing a delinquent debt must pay interest on the outstanding amount of principal which is overdue in proportion to the period of late payment for which the interest rate charged is not allowed to exceed 150% of the interest rate charged on due repayment that is determined upon the date of such debt becoming delinquent.

- Where the variable interest rate is applied, a credit institution and customer must enter into an agreement on principles and factors for determination of the variable interest rate, and on the date of adjustment to the loan interest rate. 

In cases where referring to factors for determination of the variable interest rate results in different loan interest rates, the credit institution shall apply the lowest loan interest rate.

Therefore, banks do not have a specific limit on the interest rate for loans, but it is based on agreement with customers and depends on factors such as market supply and demand for capital, loan demand, and creditworthiness to determine the appropriate interest rate. However, the loan interest rate of credit institutions (banks) should not exceed the maximum loan interest rate determined by the Governor of the State Bank of Vietnam for each period in order to meet certain capital requirements specified in (*) above.

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Key word: loan | loan interest rate | in Vietnam | Vietnam | people under 18 years old |

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