CNY 100,000 Loan Dispute – Guarantors Held Liable

Mr. Pan lent 500,000 CNY to Mr. Zhang, with Mr. Lin and Mr. Yang acting as guarantors. After partial repayment of 400,000 CNY plus some interest, a balance of 100,000 CNY remained unpaid. The borrower disputed the outstanding amount, claiming a different oral interest rate. The court ruled in favor of the lender, ordering repayment of the principal and interest at four times the central bank rate, with the guarantors jointly liable.

On 19 January 2011, Mr. Zhang borrowed 500,000 CNY from Mr. Pan, agreeing to a monthly interest rate of 2% and a repayment date of 17 February 2011. Mr. Lin and Mr. Yang signed as guarantors, each assuming joint repayment responsibility. Mr. Zhang later repaid 400,000 CNY of principal and some interest, but the remaining 100,000 CNY plus interest from 1 February 2012 was not paid. Mr. Pan filed a lawsuit seeking the balance, interest at the agreed rate (later modified to four times the central bank benchmark rate), and joint liability from both guarantors.

The case was heard in open court on 30 March 2012. Mr. Pan was represented by Mr. Liu. Mr. Zhang and Mr. Lin attended the hearing, but Mr. Yang did not appear despite proper notice. The plaintiff submitted a signed IOU, a joint repayment commitment, and a bank transfer record. The defendants acknowledged the loan but argued that the interest rate had been orally agreed at 6% per month, not 2%, and that total repayments exceeded 470,000 CNY, leaving only about 35,000 CNY outstanding. They provided no written evidence to support this claim.

The court found the loan agreement valid and the facts as presented by Mr. Pan to be correct. The defendants’ assertion of a 6% oral interest rate lacked evidentiary support. The court applied the rule that interest on private loans may not exceed four times the central bank’s benchmark rate for the same period. The bank rate in January 2011 was 0.446% per month. The court ordered Mr. Zhang to repay the remaining 100,000 CNY plus interest calculated at four times the central bank rate from 1 February 2012 until full payment. Mr. Lin and Mr. Yang were ordered to bear joint and several liability, with the right to seek reimbursement from Mr. Zhang.

According to relevant law, a private lending contract is legally binding when the facts are clear. Interest clauses must comply with statutory caps, and any deviation beyond the four‑times limit is unenforceable. The guarantors, having signed a joint repayment commitment, assumed a primary obligation. The court held that the defendant’s unsupported oral variation of the interest rate could not override the written agreement. The decision relied on the Contract Law and judicial interpretations regarding private lending interest limits.

This case highlights the importance of documenting loan terms in writing and the risks guarantors assume. Lenders should ensure that interest rates stay within the legal maximum. Borrowers cannot rely on unsubstantiated oral agreements to reduce their liability. The court’s ruling reaffirms the standard that private loan interest exceeding four times the central bank rate will not be protected. The guarantors here must pay the remaining debt and may then pursue the borrower for reimbursement.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.