The loan interest cannot be deducted from the loan principal in advance. If the interest is deducted from the principal in advance, the borrower shall repay the loan according to the actual loan amount and calculate the interest. It is illegal for the lender to deduct the interest directly from the loan principal, which is not protected by law, and the interest on the beheaded part in contract disputes is not protected by law.
According to the classification of business entities, loans can be divided into bank loans, small loan company loans, P2P loans and private loans. Because banks and small loan companies have strict business compliance requirements, the probability of beheading interest is very small, and beheading interest mostly exists in P2P loans and private lending.
legal ground
People's Republic of China (PRC) Civil Code
Article 670 Interest on a loan shall not be deducted from the principal in advance. If the interest is deducted from the principal in advance, the loan will be repaid according to the actual loan amount and the interest will be calculated. Article 680 usury is prohibited and the loan interest rate shall not violate the relevant provisions of the state.
If there is no agreement on the payment of interest in the loan contract, it shall be deemed that there is no interest.
If the loan contract does not specify the payment method of interest, and the parties cannot reach a supplementary agreement, the interest shall be determined according to the local or the parties' trading methods, trading habits, market interest rates and other factors; Loans between natural persons are regarded as interest-free. Article 677 Where the borrower repays the loan in advance, unless otherwise agreed by the parties, the interest shall be calculated according to the actual loan period. Article 671 Where the lender fails to provide the loan on the agreed date and amount, thus causing losses to the borrower, it shall compensate for the losses.
If the borrower fails to collect the loan according to the agreed date and amount, it shall pay interest according to the agreed date and amount. Article 673 Where the borrower fails to use the loan according to the agreed purpose, the lender may stop issuing the loan, recover the loan in advance or terminate the contract. Article 674 The borrower shall pay interest at the agreed time limit. If the time limit for paying interest is not stipulated or clearly stipulated, and cannot be determined according to the provisions of Article 510 of this Law, if the loan period is less than one year, it shall be paid together with the loan; If the loan term is more than one year, it shall be paid at the end of each year; if the remaining term is less than one year, it shall be paid together with the loan.