In life, borrowing money to meet spending or investment needs is very common. However, not always does the borrower repay the loan on time as agreed, which can lead to disputes between the parties. Therefore, the right to request interest when the borrower is late payment is a matter that is raised to ensure the rights of the lender and also creates more pressure for the borrower in debt repayment. In this article, TNTP will analyze the right to request late payment interest within the scope of a loan agreement for money between individuals and legal entities that are not credit institutions with each other (hereinafter referred to as the property loan contract).
1. Borrowing activities and interest
● Borrowing money, in the legal language called a property loan contract, in Article 463 of the Civil Code (“CV”) 2015, a property loan contract is stipulated as an agreement between the parties, whereby the lender delivers the property (in this case money) to the borrower and when it is due, the borrower must repay the lender the entire amount previously borrowed. If the parties agree on the interest rate, the borrower must also pay the interest to the lender.
● Interest is an amount that the borrower must pay to the lender by agreement or by law. Interest includes interest agreed upon by the parties in the contract and interest prescribed by law, which includes late payment.
2. Determination of interest and interest rates in property loan contracts in the case of application of the 2015 Civil Code
● In cases where a loan is interest-free, and the borrower fails to repay the debt or only partially repays it when it comes due, the lender has the right to demand payment of interest at a rate of 10% per year on the overdue amount corresponding to the time the payment was late, except in cases where there is a different agreement or the law has different regulations.
Interest on overdue principal = (unpaid overdue principal) x (10% interest rate per year) x (time the principal payment was late).
● In cases where a loan is with interest, and the borrower fails to repay the debt or only partially repays it when it comes due, the borrower must pay interest as follows:
a) Interest on the overdue principal during the agreed term but not exceeding 20% per year of the loan amount (except in cases where the law has different relevant regulations) corresponding to the period of principal payment not yet paid at the time of contract establishment. If the parties agree to pay interest but do not specify the interest rate and there is a dispute, the interest rate shall be determined at 10% per year.
Interest on the overdue principal during the agreed term = (unpaid principal) x (interest rate according to the agreement or 10% interest rate per year) x (time of unpaid interest on principal).
b) In case of late payment of interest on the principal during the agreed term, interest overdue interest on the principal must also be paid at a rate of 10% per year corresponding to the period of late payment of interest on the principal, except in cases where there is a different agreement.
Interest on overdue interest on principal = (unpaid interest on principal) x (10% interest rate per year) x (time of late payment of interest on principal);
c) Interest on overdue principal not yet paid is 150% of the loan interest rate agreed by the parties in the contract corresponding to the period of late payment, except in cases where there is a different agreement. The interest rate on overdue principal agreed by the parties cannot exceed 150% of the interest rate of 20% per year.
Interest on overdue principal not yet paid = (overdue principal) x (interest rate agreed by the parties or 150% of the loan interest rate agreed by the parties) x (time the principal payment was late).
3. Cases where the lender has no right to claim interest due to late payment
● Due to agreement between parties: In case the parties have an agreement, it may be in the contract or at the time when the borrower is late payment. Since demanding interest for late payment is a right, the lender may or may not require the borrower to pay the interest for late payment;
● Due to the fault of the lender: If the borrower is late payment interest entirely due to the fault of the lender, the lender may not have the right to demand the borrower fulfill the obligation of paying interest for late payment. For example, if the lender intentionally refuses to receive payment from the borrower on time;
● Due to force majeure events: According to Article 156 of the Civil Code of 2015, the occurrence of force majeure events will exempt civil liability, including the obligation to pay interest for late payment. Therefore, the lender will not have the right to demand the borrower fulfill this obligation. Force majeure events are events that occur objectively and cannot be foreseen or remedied despite applying all necessary measures and capabilities.
Above is the content of the article “The right to request late payment interest”. We hope the article will be useful to you.