Loan Agreement
Template loan agreement (loan for consumption, mutuum) between private persons: the lender hands over a sum of money, ownership passes to the borrower, who must return the same amount. Under the Civil Code (Cap. 16) interest is due only if agreed, and the agreed rate cannot exceed eight per cent per annum; any higher rate is reduced to 8% and interest already paid in excess is deducted from the capital (article 1852). On late payment of a money debt the creditor is entitled to interest at 8% from the date of default without proving loss (articles 1139 and 1140). Loans granted by a business to a consumer are consumer credit and follow different rules.
Loan Agreement
LOAN AGREEMENT
THE LENDER: [full name], holder of identity card / passport No. [number], of [address].
THE BORROWER: [full name], holder of identity card / passport No. [number], of [address].
1. THE LOAN
The Lender lends to the Borrower the sum of [amount] EUR ([amount in words]), which the Borrower acknowledges having received. Ownership of the sum passes to the Borrower.
2. REPAYMENT
The Borrower undertakes to repay the said sum by [date] / in [number] instalments of [amount] EUR each, payable on the [number] day of each month, by [bank transfer to IBAN / other means].
3. INTEREST
The loan is granted [without interest / with interest at the rate of [rate]% per annum, which shall not exceed eight per cent (8%) per annum in terms of article 1852 of the Civil Code]. Interest, where agreed, is calculated on the outstanding balance and paid together with each instalment.
4. EARLY REPAYMENT
The Borrower may repay the whole or part of the loan before the agreed date, in which case interest, if any, shall be due only for the period during which the sum was actually used.
5. DEFAULT
In case of failure to pay on the due date, the Borrower shall owe interest at the rate of eight per cent (8%) per annum on the sums in arrears from the date on which he is put in default by a judicial act or by a written demand, without prejudice to any other remedy at law.
6. GOVERNING LAW AND JURISDICTION
This agreement is governed by the laws of Malta, and the Maltese courts shall have jurisdiction over any dispute arising from it.
Signed in duplicate at [place], on [date].
The Lender: ______________________ The Borrower: ______________________
Legal basis
Frequently asked questions
What is the maximum interest rate on a private loan in Malta?
Eight per cent per annum. Article 1852 of the Civil Code provides that the rate of interest cannot exceed 8%; a higher agreed rate is reduced to 8% and any excess already paid is deducted from the capital. Contracts disguised to evade the limit can be rescinded (article 1853).
Is interest automatically due on a private loan?
No. Interest on a loan for consumption is due only if expressly agreed. Without agreement the borrower repays only the capital; interest at 8% runs only from default, once the borrower has been formally put in default (articles 1139 and 1140 of the Civil Code).
Does the loan agreement have to be in writing?
A loan is valid without writing, but a signed agreement is strong evidence of the amount, the date and the repayment terms. A private writing acknowledging the debt also helps if the lender later needs to sue, for example before the Small Claims Tribunal for amounts up to €5,000.