Disputes over property loan contracts: how will the Court determine interest and loan rates?

According to Article 5 of Resolution 01/2019/NQ-HDTP, the Supreme People's Court has provided guidance on the application of a number of legal provisions on interest, interest rates, and specific penalties for violations. The calculation of interest and interest rates in resolving disputes over property loan contracts is carried out as follows:

Interest-free loan agreement

- When the borrower fails to repay the debt or does not repay it in full, upon request of the lender, the Court shall determine that the borrower must pay interest on the overdue principal at the interest rate prescribed in Clause 2, Article 468 of the 2015 Civil Code on the overdue amount at the time of repayment corresponding to the period of overdue principal payment, unless otherwise agreed or otherwise provided by law.

Interest on overdue principal unpaid = (overdue principal) x (maximum interest rate 10%/year) x (time of late principal payment);

Interest-bearing loan agreement

- Interest on unpaid principal within the term is at the agreed interest rate but does not exceed the interest rate prescribed in Clause 1, Article 468 of the 2015 Civil Code (not exceeding 20%/year) corresponding to the loan term with unpaid interest on the principal at the time of contract establishment. In case the parties have an agreement on interest payment but do not clearly specify the interest rate and there is a dispute, the interest rate is determined at 50% of the maximum interest rate prescribed in Clause 1, Article 468 of the 2015 Civil Code (not exceeding 10%/year) at the time of debt payment.

Interest on principal not yet paid = (unpaid principal) x (not more than 10% in case of no agreement on interest) x (loan period of unpaid interest on principal).

- In case of late payment of interest on principal within the due date, interest must also be paid on the interest debt at the interest rate prescribed in Clause 2, Article 468 of the 2015 Civil Code at the time of debt payment corresponding to the period of late payment of interest on principal, unless otherwise agreed.

Interest on outstanding interest = (unpaid interest) x (not more than 10%/year) x (late payment period of interest on principal);

- Interest on overdue principal not yet paid is equal to 150% of the loan interest rate agreed by the parties in the contract corresponding to the period of late payment, unless otherwise agreed. The interest rate on overdue principal agreed by the parties must not exceed 150% of the interest rate prescribed in Clause 1, Article 468 of the 2015 Civil Code.

Interest on overdue principal unpaid = (overdue principal) x (interest rate agreed by the parties or 150% of the loan interest rate agreed by the parties) x (period of late principal payment).

The above is a guide to calculating loan interest rates when filing a lawsuit in Court applicable to parties to a contract that are not credit institutions. In cases where one party to the contract is a credit institution, this interest rate does not apply.