Appeal Over CNY 300,000 Loan Interest Calculation
In this case, the appellate court reviewed a dispute between a borrower and a lender over the repayment of a private loan of CNY 300,000. The central issues concerned the proper calculation of interest on partial repayments and whether the parties had agreed to reduce the interest rate. The trial court had ordered the borrower to repay the outstanding principal of CNY 161,578 plus interest, and the borrower appealed. The higher court affirmed the trial court’s decision.
The borrower, Mr. Liu, obtained a loan of CNY 300,000 from the lender, Mr. Wang, on September 24, 2008. A written promissory note stated the amount and a monthly interest of CNY 9,000, which equated to 3 percent per month. Mr. Liu made several payments: CNY 100,000 on December 5, 2008; CNY 96,000 on September 29, 2009; and another CNY 100,000 on August 23, 2010. Mr. Liu also claimed he paid an additional CNY 10,000 on June 1, 2009 as interest on this loan. Mr. Wang argued that the CNY 10,000 was for a separate loan of CNY 500,000. Mr. Liu contended that the parties later agreed to reduce the interest rate to 1.5 percent per month, and that the trial court had wrongly applied a 3 percent rate for the earlier payments.
At trial, both parties presented evidence, including the promissory note, payment receipts, and a court transcript from a related case involving the CNY 500,000 loan. The trial court found that the payments made before August 23, 2010 were voluntary and that the borrower had not objected to the 3 percent monthly rate at the time. The court therefore treated those payments as having been made at the contractual 3 percent rate. For the period after August 23, 2010, the court applied the statutory maximum of four times the central bank’s benchmark lending rate. The court calculated that of the CNY 100,000 paid on December 5, 2008, CNY 21,000 was interest and CNY 79,000 was principal, and of the subsequent total of CNY 196,000, CNY 136,578 was interest and CNY 59,422 was principal. This left an outstanding principal of CNY 161,578.
On appeal, Mr. Liu argued that the trial court had erred in two respects. First, he claimed that the CNY 10,000 payment on June 1, 2009 should be credited to the present loan. Second, he asserted that the interest rate had been reduced to 1.5 percent per month by mutual agreement. The appellate court examined the record, including the transcript from the related case. It found that Mr. Wang’s agreement to a 1.5 percent rate was conditional on Mr. Liu repaying the entire loan by January 2009, a condition that was not met. As to the CNY 10,000 payment, the court noted that the transcript did not prove it belonged to this loan, and Mr. Wang’s explanation that it applied to the separate loan was more credible.
The court held that the trial court’s findings were supported by the evidence and that the legal principles applied were correct. Under Chinese law, interest on private loans may exceed the four-times benchmark rate only if the borrower voluntarily pays the higher amount. Here, the borrower had made the early payments without objection, and the trial court properly treated them as voluntary at the 3 percent rate. The appellant failed to provide sufficient evidence that the rate was adjusted or that the CNY 10,000 was meant for this loan. Accordingly, the appellate court dismissed the appeal and upheld the original judgment. The borrower must pay the remaining principal of CNY 161,578 plus interest from August 24, 2010 at four times the central bank’s benchmark lending rate until full payment.
This case illustrates how courts treat partial repayments on loans with above-legal interest rates in China. When a borrower makes payments without disputing the rate, those payments are often considered voluntary. Borrowers should keep clear records of any agreements to change interest terms and ensure that conditions for such changes are documented. Lenders, meanwhile, must be aware that courts will not enforce interest exceeding the statutory ceiling unless the borrower voluntarily pays. The appellate decision confirms that the original calculation method was fair and consistent with legal standards.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.