Loan Agreement with Interest

Turn informal promises into enforceable debts. Secure your capital with a professional lending contract.

Don't Lend Money on a Handshake

Lending money - whether to friends, family, or business partners - carries inherent risks. Without a written contract, a loan is often treated legally as a gift, leaving you with zero recourse if the borrower stops paying.

A Loan Agreement is your safety net. It transforms a verbal understanding into a legally binding obligation. By documenting the loan, you are:

Protecting your capital: Ensuring you have the legal right to demand repayment.
Preventing disputes: Removing ambiguity regarding dates, amounts, and interest.
Preserving relationships: Keeping money matters professional and clear, so personal connections aren't ruined by financial confusion.

How This Agreement Works

This document serves as the master record of the transaction between the Lender (you) and the Borrower. It is designed to be comprehensive yet easy to customize.

Key Elements Defined in This Contract:

The Principal: The exact amount of money being lent.
The Interest Rate: The cost of borrowing (must comply with Cambodian law).
Repayment Schedule: Specific dates when payments are due (e.g., monthly, quarterly, or lump sum).
Default Clauses: What happens if the borrower misses a payment (late fees, immediate termination, or legal action).

Critical Legal Requirement: The 18% Rule

In Cambodia, the Civil Code places a strict cap on interest rates for private loans. You cannot charge more than 18% interest per annum.

If your agreement stipulates a rate higher than 18%, the excess amount is legally void, and a court will not enforce it. Furthermore, any excess interest already paid by the borrower may be deducted from the principal debt.

Who Should Use This Document?

This template is versatile and suitable for various lending scenarios:

Private Lenders: Individuals lending personal funds to earn interest income.
Small Business Owners: Extending credit to partners or employees.
Family & Friends: While it may feel formal, using a contract for personal loans is the best way to prevent family conflict. It sets clear boundaries and expectations.

Note: If you are a registered Microfinance Institution (MFI) or Bank, this standard template may not cover specific regulatory compliance required by the National Bank of Cambodia.

Ending the Agreement: Repayment & Termination

A loan agreement doesn't just last forever; it has a specific lifecycle. Here is how the contract concludes:

Performance (Full Repayment): The ideal scenario. The borrower pays back the principal plus all accrued interest. The contract is considered "fulfilled" and ends automatically.
Mutual Termination: Both parties can agree in writing to end the loan early. This often happens if the lender decides to forgive the debt or accepts a smaller settlement amount to close the account.
Breach & Default: If the borrower violates the terms (e.g., misses payments), the lender can trigger the Termination Clause. This usually allows the lender to demand the entire remaining balance immediately (Acceleration Clause) and pursue legal action.

Enforcement Checklist

To ensure your loan agreement holds up in court, you must follow these formalities:

Signatures: Both parties must sign or thumbprint the document.
Witnesses: We strongly recommend having two independent witnesses sign the document. This prevents the borrower from claiming they never signed it.
Currency Clarity: Clearly state if the loan is in USD or KHR to avoid exchange rate disputes.

Frequently Asked Questions

Yes. You can include a late fee or penalty interest in the agreement. However, this must be reasonable. If the penalty is excessively high, a court may view it as a violation of the interest cap regulations and refuse to enforce it.

No. A private loan agreement does not strictly require a lawyer's stamp to be valid between the parties. However, for large sums of money, having a lawyer review the contract or having the signatures certified by a local authority (Commune/Sangkat) significantly strengthens your position in court.

If you have this signed agreement, you have evidence of the debt. You can send a formal Letter of Demand. If they still refuse, you can file a complaint with the court to seize assets or garnish wages. Without this written agreement, proving the debt exists is extremely difficult.