Under normal circumstances, as long as the conditions prescribed by law are met, private lending is legal and not illegal.
According to Article 211th of the Contract Law, if the loan contract between natural persons stipulates to pay interest, the loan interest rate shall not violate the provisions of the state on limiting the loan interest rate.
At the same time, according to the relevant provisions of the Supreme People's Court's Opinions on People's Trial of Lending Cases, the interest rate of private lending can be appropriately higher than that of banks, but the maximum interest rate should not exceed four times that of similar loans of banks.
Therefore, the principal of private lending is protected, and the interest that does not exceed 4 times the interest rate of similar loans of banks is also protected by law, and the excess is not protected by law.
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Relevant provisions of Several Opinions on People's Courts' Trial of Lending Cases
When trying loan cases, the people's courts should follow the principles of voluntariness, mutual benefit, fairness and legality, protect the legitimate rights and interests of creditors and debtors, and limit high interest rates. According to the experience of trial practice, the following opinions are put forward for reference when trying such cases.
Loans between citizens, between citizens and legal persons, and between citizens and other organizations shall be accepted as loan cases.
Lawsuits arising from borrowing securities such as foreign currency, Taiwan dollars and treasury bills shall be accepted as loan cases.
If the loan-loan relationship is clear and the creditor applies for a payment order, the people's court shall examine and accept it in accordance with the relevant provisions of the Civil Procedure Law on supervision procedures.
When examining a loan case, the people's court shall, in accordance with the provisions of Article 108 of the Civil Procedure Law, require the plaintiff to provide a written iou.
If there is no written receipt, the necessary factual basis shall be provided. If the above conditions are not met, the ruling will not be accepted.
If the whereabouts of the debtor is unknown when it is a creditor, it shall be under the jurisdiction of the debtor's original domicile or the location of its property.
The creditor should be required to provide evidence to prove the existence of the loan-loan relationship, and after accepting it, the debtor should be summoned to respond by announcement. If the debtor still fails to respond to the lawsuit at the expiration of the announcement period and the loan relationship is clear, the judgment may be made by default after trial;
If the loan-loan relationship cannot be ascertained, the lawsuit shall be suspended. During the trial, if the debtor leaves, his whereabouts are unknown and the loan relationship is clear, he may make a judgment by default; If the facts are difficult to ascertain, the proceedings shall be suspended.
The interest rate of private lending can be appropriately higher than that of banks, and people everywhere can grasp it according to the actual situation in their own regions.
However, the maximum loan interest rate shall not exceed four times the bank's similar loan interest rate (including interest rate). Beyond this limit, the excess interest will not be protected.
The lender shall not include interest in the principal to seek high profits. If it is found during the trial that the creditor included the interest in the principal to calculate compound interest, if the interest rate exceeds the limit stipulated in Article 6, the excess interest will not be protected.