Chapter XII Loan Contracts

Article 196 A "loan contract" is a contract whereby the borrower borrows a loan from the lender and repays the loan with interest when the loan becomes due.

Article 197 Loan contracts shall be made in written form, except for the loans otherwise contracted between natural persons.

A loan contract contains such clauses as the category of the loan, kind of currency, purpose of use, amount, interest rate, term and method of repayment.

Article 198 In making a loan contract, the lender may require the borrower to provide a guaranty. The guaranty shall be governed by the provisions of the Guaranty Law of the People's Republic of China.

Article 199 In making a loan contract, the borrower shall, as required by the lender, provide the lender with truthful information about its business activities and financial conditions related to the borrowing.

Article 200 The interest on a loan may not be deducted from the principal in advance. If the interest is deducted from the principal in advance, the loan shall be repaid and the interest shall be calculated according to the actual amount of the loan provided.

Article 201 A lender who fails to provide the loan at the contracted time and amount and thus causes a loss to the borrower shall hold the liability for the loss.

A borrower who fails to take the loan at the contracted time and amount shall pay an interest based on the contracted time and amount.

Article 202 The lender may, as contracted, inspect and supervise the use of the loan. The borrower shall as contracted regularly provide such materials as financial and accounting statements to the lender.

Article 203 If the borrower fails to use the loan in accordance with the contracted purpose of the use, the lender may stop providing the loan, recall the loan ahead of time or dissolve the contract.

Article 204 The interest rates of the financial institutions offering loan services shall be fixed within the ceiling and floor of loan interest rates set by the People's Bank of China.

Article 205 The borrower shall pay the interest within the contracted time limit. If the time limit for payment of interest is not stipulated or not clearly stipulated by the parties, nor can it be determined pursuant to the provisions of Article 61 of this Law, the interest shall be paid together with the repayment of the loan in case the loan term is less than one year; the interest shall be paid at the end of each full year in case the loan term is more than one year and, the interest shall be paid together with the loan repayment if the remaining loan term is less than one year.

Article 206 The borrower shall repay the loan within the contracted time limit. If the time limit is not stipulated or not clearly stipulated by the parties, nor can it be determined pursuant to the provisions of Article 61 of this Law, the borrower may repay the loan at any time, and the lender may urge the borrower to repay the loan within a reasonable period of time.

Article 207 A borrower who fails to repay the loan within the contracted time limit shall pay an overdue interest pursuant to the contract or to the relevant regulations of the State.

Article 208 If the borrower repays the loan ahead of schedule, unless the parties stipulate otherwise, the interest shall be calculated according to the actual duration of the loan.

Article 209 The borrower may apply to the lender for an extension of the loan term before the loan becomes due. With the consent of the lender, the loan term may be extended.

Article 210 A loan contract between natural persons takes effect from the time when the lender provides the loan.

Article 211 Where a loan contract between natural persons does not stipulate the payment of interest or stipulates it unclearly, the loan shall be deemed as bearing no interest.

If a loan contract between natural persons stipulates the payment of interest, the interest rate may not violate the regulations of the State regarding the restriction on the loan interest rates.