A loan agreement is an agreement between the parties in which the lender delivers an asset to the borrower; when repayment is due, the borrower must return such an asset in the correct type, quantity, and quality, and only pay interest if agreed upon or required by law. So, what does current law regulate about loan agreements? Let's explore this topic with NPLaw in the article below.

I. What is a Loan Agreement?

Article 463 of the Civil Code 2015 defines a loan agreement as follows:

  • A loan agreement is an agreement between parties in which the lender delivers an asset to the borrower; upon the due date, the borrower must return such an asset in the correct type, quantity, and quality, and pay interest only if agreed upon or required by law. 

1. Characteristics of loan agreements 

The loan agreement has the following key characteristics:


a) Unilateral or bilateral contract

  • Unilateral: When no interest is agreed upon, the lender has the right to demand repayment of the equivalent asset, but the borrower gains no rights toward the lender.
  • Bilateral: When interest is agreed upon, the lender must deliver the asset on time, and the borrower must return it with the required interest.

b) With or without compensation 

  • With compensation: The borrower must pay interest, providing the lender with financial benefit.
  • Without compensation: No interest is agreed upon in the contract.

c) Consensual or real contract

  • Consensual: In bilateral cases, rights and obligations for both parties arise once the contract is signed.
  • Real: In unilateral cases, the contract only takes effect once the asset has been handed over. The lender has the right to claim the debt and has no obligation to the borrower.

2. Subject of loan agreements 

The subject of loan agreements is most commonly money (in cash). However, it can also include gold, precious metals, gemstones, or other valuable assets.

3. Interest rates in loan agreements

An interest rate is a specific percentage that the borrower must additionally pay to the lender, calculated by time (weekly, monthly, or yearly), depending on the parties’ agreement or by law.

According to Article 468 of the Civil Code:

  • The interest rate is as agreed by the parties but cannot exceed 20% per year of the loan amount unless otherwise regulated by specific laws. (Based on the actual circumstances and upon the proposal of the Government and the National Assembly Standing Committee.)
  • If the agreed interest rate exceeds the maximum one prescribed in this Article, the excess interest rate shall be invalid. 

4. Term of loan agreements

The Civil Code does not define "loan term", it is generally understood as the period from the contract’s effective date until repayment is due. When the term ends, the borrower must return both the principal amount and any applicable interest to the lender.

II. Forms of loan agreements

Loan agreements can be made verbally or in writing:

  • Verbal: For small amounts or between parties with a close relationship.
  • Written: When the loan amount is significant or the relationship is purely transactional.

III. Essential contents of loan agreements 

The proper loan agreement should include:

  • Details of the parties
  • Subject
  • Loan term
  • Interest rate (if any)
  • Rights and obligations of each party
  • Provisions for damages or fines for breach
  • Methods for dispute resolution
  • Assurances and commitments of the parties

Additional terms may be added as agreed between the parties.

IV. Common Questions about loan agreements

1. If someone signs a loan on behalf of another, who is responsible for repayment?

Under Articles 463 and 466 of the Civil Code, a person who signs the contract is legally bound to repay the loan, even if the funds were borrowed for someone else. In fact, such a person has full civil capacity, the agreement does not violate the prohibitions of the law, and is not contrary to social ethics, thus the civil transaction is still valid.


2. Can courts resolve disputes over loan agreements?

If parties cannot resolve disputes through negotiation, they may file a claim with the court.

  • Under Article 35 of the Civil Procedure Code 2015, district-level People's Courts have jurisdiction for disputes involving local individuals or organizations.
  • If the case involves foreign elements, the provincial-level People's Court will have the competence.

3. Can a loan agreement in foreign currency be notarized?

Under Circular 32/2013/TT-NHNN, the use of foreign currency in domestic transactions is restricted unless specifically allowed. Therefore, personal loan agreements in foreign currency are invalid and cannot be notarized under Article 7 of the 2014 Law on Notarization.

4. Can a lawyer represent both spouses, while one for a loan dispute and the other for a divorce proceeding?

As long as the two matters are unrelated and do not involve conflicting interests. Under Article 9 of the Law on Lawyers, conflicts only arise when representing parties with opposing interests in the same case.

V. Legal services for loan agreements

As a professional legal consultancy, NPLaw provides:

  • Advice on the applicable legal provisions related to loan agreements
  • Drafting of legally compliant agreements to protect clients' rights and interests
  • Risk assessment and mitigation strategies
  • Negotiation support and dispute resolution services