Tips for drawing up a loan agreement
What is a loan?
In a loan agreement, a lender undertakes to make a specified amount of money available to the borrower. In turn, the borrower undertakes to pay back this amount of money. In addition, the payment of interest is usually agreed for the transfer of the money and its repayment.
Below, we focus on a loan agreement between private individuals, in which neither party grants or accepts the loan on a professional or commercial basis.
Does a loan agreement have to be concluded in writing?
No. A loan agreement is also valid if it was agreed orally. To ensure that there is clarity from the beginning and in the event of a dispute, it is easier to provide evidence of what was agreed, it is advisable to conclude the agreement in writing. Likewise, the repayment of the loan amount should be confirmed in writing.
Is interest always due?
Interest is only due if this was agreed. The interest applies per year, unless other arrangements are in place. If an agreement was made that interest is due, but not how much, the locally applicable amount is assumed. In the absence of such, an interest rate of 5% shall apply. Among private individuals, a maximum interest rate of 18% may be agreed. Interest ceilings also apply at a cantonal level. No additional interest may be charged on interest amounts (so-called compound interest).
Late payment/repayment
If the loan is not paid out by the lender, the borrower may demand the payment plus default interest (and potentially also compensation for other damages) within six months from the time of the delay (so-called default). Other damages could be, for example, if the borrower had to borrow the loan amount from someone else at a higher rate of interest because of the delay.
Default interest is not the same as loan interest. Default interest is owed for the late payment of the loan amount, while loan interest is the interest owed for borrowing the money.
On the other hand, if a repayment date has been agreed and not adhered to, the borrower can be held liable for the payment of default interest.
If no repayment deadline was agreed, the loan must be repaid within six weeks from the time of the first request for repayment.
Repayment of the loan can no longer be requested after a period of ten years and six weeks if there was no interruption in the limitation period during this time. An interruption would be the payment of interest or legal action to reclaim the loan amount, for example.
You can download the following document free of charge. In it, you will further details and a sample contract.