Rural Credit Union Wins Judgment Against Borrower and Guarantor for 950 Yuan Outstanding Loan

A rural credit cooperative in Shandong Province has successfully obtained a judgment against a borrower and his guarantor for the repayment of a loan that had been partially repaid over several years, leaving only a small balance remaining.

In this case, the credit union had originally lent 49,500 yuan to the borrower through a formal loan agreement. The loan carried a monthly interest rate of 12.6005 per thousand and was originally due in June 2010. The guarantor signed a guarantee agreement accepting joint and several liability for the full amount including principal, interest, penalties, and collection costs.

After the loan matured, the borrower failed to make full repayment. However, the court records indicate that partial repayments were made in installments between 2011 and 2013, gradually reducing the outstanding balance from the original 49,500 yuan down to just 950 yuan by the time of the judgment.

The credit union filed suit at Mudan District People’s Court in Heze, Shandong Province. Both the borrower and the guarantor were properly summoned but failed to appear at the hearing. The court proceeded with the case in their absence under Chinese civil procedure rules governing default judgments.

The court found that the loan agreement and guarantee contract were valid and legally binding. The evidence included the original loan contract, a loan certificate, and the guarantee agreement, all bearing the signatures and fingerprints of the respective parties. Since neither defendant appeared to contest the claims, the court accepted the credit union’s evidence without challenge.

The judgment ordered the borrower to repay the remaining principal of 950 yuan along with accrued interest and penalties. The interest was calculated at the agreed monthly rate of 12.6005 per thousand, with a 30 percent penalty surcharge applied to overdue amounts. The guarantor was held jointly and severally liable, meaning the credit union could pursue either party for the full outstanding amount.

Importantly, the court also ruled that once the guarantor fulfilled the payment obligation, he would have the right to seek reimbursement from the borrower. This right of recourse is established under Chinese guarantee law and ensures that the ultimate financial responsibility remains with the person who received the loan.

This case illustrates how Chinese financial institutions handle loan defaults through the judicial system. Rural credit cooperatives, which serve as important lenders in China’s rural areas, frequently rely on personal guarantors to secure loans. When borrowers default, these institutions can pursue both the borrower and any guarantors through the court system, even for relatively small outstanding balances.

The fact that the credit union pursued litigation for a remaining balance of only 950 yuan demonstrates their commitment to enforcing loan agreements regardless of the amount. For borrowers and guarantors alike, this serves as a reminder that loan obligations persist until fully satisfied, and that partial repayment, while reducing the debt, does not eliminate the legal obligation to pay the remaining balance.

Disclaimer: The information presented in this article is based on publicly available court records and is intended for educational purposes only. It does not constitute legal advice. Readers should consult qualified legal professionals for advice specific to their circumstances.