The transfer of money or valuable items as a loan requires adherence to clear legal procedures to protect the interests of all parties involved in the agreement. The key document in such cases is the loan agreement — an arrangement whereby one party (the lender) transfers money or items, defined by generic characteristics, to another party (the borrower). The borrower, in turn, is obligated to return an equivalent amount or similar items.
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When and How to Conclude a Loan Agreement
The Ministry of Justice of Ukraine emphasizes that a loan agreement is considered concluded from the moment of actual transfer of money or items. If the loan amount exceeds ten times the non-taxable minimum income for citizens, or if the lender is a legal entity (regardless of the amount), the agreement must be executed in writing.
Notarization of the agreement is not mandatory; however, the parties may choose to consult a notary for additional protection of their arrangements.
Receipt and Interest on the Loan
A receipt from the borrower acknowledging the receipt of money or items can serve as proof of the agreement and its terms. The receipt should include:
- the date and place of its creation;
- full identification details of both parties (full name, passport details, addresses);
- the subject of the loan, the amount of debt (for money — in figures and words, specifying the currency; for items — name, quantity, weight, etc.);
- the term and procedure for returning the loan;
- conditions for transfer and possible penalties for violations;
- signatures of the parties.
The agreement can be either interest-bearing or interest-free. If the interest rate is not specified, the discount rate of the National Bank of Ukraine applies. A loan agreement is considered interest-free if:
- it is concluded between individuals for a small amount (up to 50 non-taxable minimums);
- it is not related to the conduct of business activities by at least one of the parties;
- items defined by generic characteristics are transferred to the borrower.
Borrower’s Obligations and Loan Repayment
The borrower must return the loan amount or items within the timeframe specified in the agreement. If no timeframe is established, repayment must occur within 30 days from the lender’s request. The loan is considered repaid after the actual transfer of items or the crediting of funds to the lender’s account.
“If the borrower fails to repay the loan on time, they are obliged to pay a penalty — it is calculated from the day the items or money were due to be returned until the actual return date, regardless of interest payments.”
In the event of a delay in repaying a part of the debt, the lender has the right to demand early repayment of the remaining debt and accrued interest.
The borrower may attempt to contest the agreement, claiming that they did not actually receive the money. However, if there is a written agreement or receipt, the court will not consider witness testimony, except in cases where it is proven that the transaction was made under duress or through deception.