Guidance on Calculating Interest Rates and Penalties for Breach of Contract in Loan Agreements

Thuy Phu

20:17, 10/07/2024

Resolution 01/2019/NQ-HDTP issued by the Council of Justices of the Supreme People's Court guiding the application of provisions on interest, interest rates, and penalties for breaches in loan contracts.

The interest rate of an asset loan contract that is not a credit agreement established on January 01, 2017, or before January 01, 2017, but falls under the application of the 2015 Civil Code is determined as follows:

Interest-free loan contract: Upon maturity, if the borrower does not repay or fully repay, then:

- Interest on overdue principal not yet paid = (Overdue principal not yet paid) x (Interest rate per Clause 2, Article 468 of the 2015 Civil Code at the time of repayment) x (Delay period of principal repayment)

For interest-bearing loan contracts: Upon maturity, if the borrower does not repay or fully repay, then:

- Interest on the unpaid principal within the term = (Unpaid principal) x (Agreed interest rate or 50% of the interest rate cap per Clause 1, Article 468 of the 2015 Civil Code at the time of repayment) x (Loan period with unpaid interest on the principal).- Interest on unpaid interest = (Unpaid interest) x (Interest rate per Clause 2, Article 468 of the 2015 Civil Code at the time of repayment) x (Delay period of unpaid interest on the principal).

Refer to Resolution 01/2019/NQ-HDTP, effective from March 15, 2019.

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