No. It is illegal to "compound interest" on private loans.

1. The sum of principal and interest that the borrower should pay after the expiration of the loan period cannot exceed the initial loan principal and the initial loan principal as the base.

2. The interest rate for the entire loan period is calculated as four times the one-year loan market quote rate when the loan contract is established.

3. If the lender requests the borrower to pay the excess amount, the People's Court will not support it.

1. How should the agreement on private loan interest be valid?

1. If the annual interest rate does not exceed 24%, it is legal and valid. If the interest rate agreed upon by both parties does not exceed the annual interest rate of 24%, and the lender requests the borrower to pay interest at the agreed interest rate, the People's Court shall support it.

2. If the annual interest rate exceeds 24% and is less than 36%, it shall be based on the wishes of the parties.

Private loans with annual interest rates of 24% to 36% are natural debts. If a lawsuit is filed, the court will not protect it. However, the parties are willing to perform automatically, and the court will not object. The borrower cannot demand the return of what has been paid. interest. 3. If the annual interest rate exceeds 36%, part of it is invalid. If the interest rate agreed upon by both parties exceeds the annual interest rate by 36%, the excess interest agreement is invalid. If the borrower requests the lender to return the interest that has been paid in excess of 36% of the annual interest rate, the People's Court shall support the request.

2. Can overdue interest and penalty interest on a loan exceed the principal?

Private loan interest and overdue interest can be claimed at the same time, but they cannot exceed the annual interest rate of 24%. Lenders are not allowed to include interest into the principal to obtain high profits. During the trial, it is found that if the creditor includes interest into the principal to calculate compound interest, and the interest rate exceeds the prescribed limit, the excess interest will not be protected. If the borrower fails to return the loan within the agreed time limit, the overdue interest shall be paid in accordance with the agreement or relevant national regulations. . If a loan contract between natural persons does not stipulate the payment of interest or the stipulation is unclear, it shall be deemed that no interest has been paid. If a loan contract between natural persons stipulates the payment of interest, the interest rate of the loan shall not violate the relevant national regulations on restrictions on loan interest rates.

3. How to calculate loan interest?

The calculation of private loan interest is as follows:

1. If the annual interest rate does not exceed 24%, it is legal and valid. If the interest rate agreed upon by both parties does not exceed the annual interest rate of 24%, and the lender requests the borrower to pay interest at the agreed interest rate, the People's Court shall support it.

2. If the annual interest rate exceeds 24% and is less than 36%, it shall be based on the wishes of the parties.

Private loans with annual interest rates of 24% to 36% are natural debts. If a lawsuit is filed, the court will not protect it. However, the parties are willing to perform automatically, and the court will not object. The borrower cannot demand the return of what has been paid. interest.

3. If the annual interest rate exceeds 36%, part of it is invalid. If the interest rate agreed upon by both parties exceeds the annual interest rate by 36%, the excess interest agreement is invalid.

If the borrower requests the lender to return the interest paid that exceeds 36% of the annual interest rate

, the people's court shall support it.

Legal basis:

"Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases"

Article 25

< p> If the lender requests the borrower to pay interest according to the interest rate stipulated in the contract, the people's court shall support it, except where the interest rate agreed upon by both parties exceeds four times the one-year loan market quotation rate at the time the contract is established.