20%/Year Rate Cap: Math & Usury Offence

“Borrow VND 100M at 3%/month” — sound familiar? 3%/month = 36%/year, above the legal cap. Countless personal loan contracts in Vietnam carry usurious rates the parties don’t recognise. Here’s the 20%/year figure and the right math.

The 20%/year cap (Art. 468, 2015 Civil Code)

Rates are agreed by parties but must not exceed 20%/year of the loan, save as other relevant laws provide.
Excess agreements → the excess is void — borrowers owe at most 20%/year; courts won’t enforce more.
Quick conversion: 20%/year ≈ 1.67%/month. Anything above 1.67%/month (2%, 3%, 5%…) breaches the cap.

Interest on overdue principal

On default: borrowers pay agreed-rate interest (within the 20% cap) for the delay plus overdue-principal interest at 10%/year absent other agreement (Art. 466, 2015 Civil Code).
Example: VND 100M at 12%/year, 6 months overdue → term interest + overdue interest (10%/year × 100M × 0.5 = 5M) + principal.

When it becomes “usury” (Art. 201 Penal Code)

Usury in civil transactions: lending at 5x or more the maximum lawful rate (i.e. 100%/year+) with illicit gains of VND 30M+ (or repeat administrative offenders).
Penalties: VND 50–200M fines or non-custodial reform up to 3 years; heavier cases mean imprisonment.

6-point safe loan checklist

1. Rate ≤ 20%/year — state %/year (not confusing %/month).
2. Amount in figures + words.
3. Specific term & due date.
4. Repayment method (bank transfer — traceable).
5. Collateral for large loans.
6. Both signatures + witness, one copy each.

FAQs

Signed at 36%/year — now what?

The excess over 20% is void — borrowers owe at most 20%/year; overpayments offset principal or are reclaimable. Lenders can’t sue for the excess.

Family “friendly rate” 24%/year?

Still over — no “family” exception. Write ≤20%/year.

High-rate loan apps?

Many dodge via “service/advisory fees” — real total costs above 20%/year are equally unenforceable in the excess; also check the app’s lending licence.

Contact us

FLAT Law Firm advises foreign nationals and their families on inheritance, wills, driving licences, health insurance and money transfers in Vietnam. Contact us for advice on your specific case.