If the loan comes from a financial institution, then the loan should be a financial loan. If the borrower of a financial loan contract requests to reduce the total annual interest rate by more than 24% on the grounds that the expenses such as interest, compound interest, penalty interest and liquidated damages advocated by the lender at the same time are too high and obviously deviate from the actual losses, it shall support it and effectively reduce the financing cost of the real economy. Therefore, the highest annual interest rate of financial loans is 24%, and the annual interest rate of 34% is usury. Common financial loans in life come from banks, and there are seven other financial institutions, namely: small loan companies, financing guarantee companies, regional equity markets, pawn shops, financial leasing companies, commercial factoring companies and local asset management companies. They are all loan companies with financial licenses.
In addition, they are all private loans, typically between individuals. After the revision of the law in August 2020, it is stipulated that the annual interest rate of private lending should be up to 4 times LPR, that is, it should not exceed 4 times the quoted interest rate of the one-year loan market announced by the National Interbank Funding Center. Authorized by the People's Bank of China, the National Interbank Funding Center announced that the quoted interest rate (LPR) of the loan market on August 22, 2022 was: 1 year, and the LPR was 3.65%, which was four times that of 14.6%. Therefore, the annual interest rate of 34% is obviously high, which is not protected by law and belongs to usury.
Legal basis:
The Supreme People's Court's Opinions on Further Strengthening Financial Trials (Fa Fa Fa Fa [2017] No.22)
2. Strictly regulate usury according to law and effectively reduce the financing cost of the real economy. The borrower of a financial loan contract, on the grounds that the expenses such as interest, compound interest, penalty interest and liquidated damages claimed by the lender at the same time are too high and obviously deviate from the actual losses, requests to reduce the total amount exceeding the annual interest rate by 24%, which should be supported to effectively reduce the financing cost of the real economy. Standardize and guide the order of private financing, and deny the validity of contract clauses that evade the upper limit of judicial protection of private lending interest rates, such as withholding principal or interest and disguised high interest rates.
Provisions of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Private Lending Cases (Revised in 2020)
Article 26 If the lender requests the borrower to pay interest at the interest rate agreed in the contract, the people's court shall support it, except that the interest rate agreed by both parties exceeds four times the market quotation of one-year loan when the contract is established.
The "one-year loan market quotation" mentioned in the preceding paragraph refers to the one-year loan market quotation issued monthly by the National Interbank Funding Center authorized by the People's Bank of China from August 20th, 20th, 20th19th.
Article 28 After the borrower and the borrower settle the loan principal and interest in the early stage, the interest shall be included in the loan principal in the later stage, and the debt certificate shall be reissued. If the interest rate in the early stage does not exceed four times the market quotation of the one-year loan when the contract is established, the amount specified in the reissued creditor's rights certificate can be confirmed as the loan principal in the later stage. The overcharged interest shall not be used as the loan principal in the future.
According to the calculation in the preceding paragraph, if the sum of the principal and interest that the borrower should pay after the expiration of the loan term exceeds the sum of the interest of the whole loan term based on the initial loan principal and calculated according to the market quotation of the one-year loan at the time of the establishment of the contract, the people's court will not support it.
Notice of the People's Bank of China on banning underground banks and cracking down on usury.
Second, strictly regulate private lending behavior. Private individual lending activities must strictly abide by the relevant provisions of national laws and administrative regulations, and follow the principles of voluntary mutual assistance, honesty and credit. In private individual lending, the lender's funds must be its own monetary funds belonging to its legitimate income, and it is forbidden to absorb other people's funds and transfer them to others for lending. The interest rate of private personal loans shall be determined by both borrowers and borrowers through consultation, but the interest rate determined through consultation between the two parties shall not exceed 4 times of the loan interest rate of financial institutions of the same grade in the same period announced by the People's Bank of China (excluding floating). Those who exceed the above standards should be defined as high-interest loans.