Parties can borrow money for numerous different purposes such as maintaining daily life and supporting business production and investment. In order to borrow money, the parties often sign a loan contract. However, the parties do not always comply and are fully performing the contract. This leads will give rise to disputes between the lender and the borrower. In the following article, let’s learn with TNTP regarding disputes that may arise from loan contracts.

1. Disputes are caused by the parties not entering into a written contract or the contract not fully expressing the necessary content

Because of trust in the borrower, the parties may not enter into a written loan contract. This is a very disadvantageous factor for the lender when a dispute arises, If the borrower does not admit to borrowing money, the lender is obliged to prove the loan and the contents related to the loan such as loan amount, loan term, interest rate, etc. In addition, because of trust, parties often sign handwritten loan contracts and the contract does not have all the necessary content. The content of the loan contract is not clearly agreed upon, the lender’s rights are often not guaranteed. Therefore, to maximize their rights, lenders should consider drafting a loan contract with all necessary content such as loan amount, loan term, interest rate, and obligations of the borrower, etc.

2. Dispute due to lack of money delivery documents

In some cases, when handing over loan money, the parties do not sign a Money Delivery Minute. If the lender uses the bank transfer method and the transfer content states “for a loan”, the money delivery record is not signed, and the lender still has evidence to prove the money delivery and receipt. This evidence can be a money transfer receipt or bank account statement. However, in the case of cash delivery, it will be difficult for the lender to prove the delivery of money if the parties do not sign the Money Delivery Minute.

If the dispute is submitted to a court, the borrower admits to receiving the money, the lender does not have to prove the delivery and receipt of the money. If the borrower does not admit to having received the money, the lender must prove that the money has been delivered. If the lender cannot provide evidence, the jurisdiction has no basis to force the borrower to pay. Therefore, to limit this dispute, the parties should agree in the contract on the time of money delivery, sign a money delivery record, and make the money transfer through the bank.

3. Dispute due to late debt repayment by the borrower

Typically, in the loan contract, the parties will agree on the loan amount, interest rate, loan term, etc. and the borrower commits to repay the loan on time as agreed. However, disputes due to the borrower’s violation of payment obligations such as not paying on time, not paying the loan in full, etc. are quite common.

To limit this risk, when making a loan, the parties should check the financial ability of the borrower and determine whether the borrower is a trustworthy partner for lending. In particular, lenders should require borrowers to use their assets as security for the loan. The lender should stipulate the handling of the secured assets in the contract when the borrower fails to make payments as the lender has full right to handle the secured assets.

4. Dispute about loan interest rate

In principle, the rate of interest for a loan will be agreed upon by the parties. However, in order to prevent the phenomenon of usury and also to create a legal basis for resolving interest rate disputes, the Civil Code 2015 stipulates that the rate of interest for a loan agreed by the parties may not exceed 20% per year unless otherwise prescribed by law. Lending at high interest rates is quite common. Nevertheless, based on the above legal regulations, in case the parties agree on an interest rate that exceeds the legal regulations, the agreement on that interest rate may be invalid, and the interest rate will be adjusted in accordance with legal regulations.

5. Disputes related to loan security assets

Currently, pledging documents on real estate, and other valuable assets or mortgaging assets to borrow money is quite common. However, the borrower may not be the owner or have no right to dispose of the pledged or mortgaged property but still deliberately conceals and signs agreements with the lender. At that time, even though the two parties had signed a loan contract with secured assets, it was difficult for the lender to handle these assets. To limit disputes related to collateral assets, when establishing a loan contract, the lender shall carefully review and verify the legal status of the collateral assets.

6. The dispute related to the falsification form of the loan contract

The parties can carry out a property loan transaction but do not sign a property loan contract but instead sign a purchase and sale contract, property deposit, and mainly a house sale contract; deposit contract for house purchase and sale, transfer of land use rights. In these cases, the lender will keep the assets/papers of the borrower. When the debt is due, the borrower does not pay the money and interest, the lender will proceed with the purchase, sale, and deposit procedures asset pile.

If the borrower sues in court, it will be difficult to claim his or her rights because the form of the contract is not a property loan contract, and the interest rate and repayment term are not specified in the contract. On the other hand, the lender will rely on the purchase contract or deposit to force the borrower to perform the contract. To limit this dispute, the parties should not sign and establish falsification contracts.

Above is the content of the article “Common disputes arising from loan contracts” that we sent to readers. Hope the above article is useful for those who are interested in this issue.