Borrower and lender rights in a private loan
When two private individuals agree on a loan, each has rights and duties grounded in law. Here are the most important ones — from the promissory note to the usury limit and what happens if the loan is not repaid.
When is it a private loan
What matters is who lends. If the lender is a business (a bank or credit company), the Consumer Protection Act (38/1978) applies: disclosure duties, the annual percentage rate, a right of withdrawal and a creditworthiness assessment. If both parties are private individuals, those rules do not apply — the loan rests on the Promissory Notes Act (622/1947), the Interest Act (633/1982) and general contract law.
Lender's rights and duties
Rights: to be repaid the principal on the agreed schedule, to charge the agreed interest and default interest, to enforce any collateral as agreed, and to assign the receivable (Promissory Notes Act 622/1947).
Duties: to give clear terms, not to charge an unreasonable rate (usury, Criminal Code 36:6), and to act properly in collection. The lender also carries the credit risk — between private individuals there is no deposit protection. Collateral or a guarantor is the only real security.
Borrower's rights and duties
Rights: to receive the terms in writing and clearly, to repay the loan on schedule (and usually early), and to seek adjustment of unfair terms under section 36 of the Contracts Act.
Duties: to repay the principal and agreed interest on time. Late payment triggers default interest (Interest Act 633/1982). The most important duty, though, is honesty before the agreement: do not take a loan you cannot repay — it leads to a new default and a debt spiral.
Interest and default interest — the legal limits
Interest is agreed freely in the promissory note. If no interest is agreed, the loan is in principle interest-free, but default interest may be charged on a late payment under the Interest Act (633/1982) even then.
The ceiling comes from usury: if the interest or other costs are clearly disproportionate to the consideration, it may amount to usury under Criminal Code 36:6, and the term can be adjusted or disregarded. In practice a safe level is clearly below 20% per year.
Collateral and guarantee
Collateral (a pledge) — for example a car or property — gives the lender the right to recover the debt from it if the loan is not repaid. Record the pledge and its terms in the promissory note or a separate pledge agreement.
A guarantee means a third person undertakes to pay the debt if the borrower does not. It is governed by the Act on Guarantees and Third-Party Pledges (361/1999). A guarantor's liability can be significant, so they must understand what they commit to. Collateral or a guarantor clearly improves a borrower's chances.
What if the loan is not repaid
The usual path is: payment reminder → voluntary settlement → a debt claim to the district court → judgment → enforcement. At every stage the written promissory note is decisive evidence: without it, proving the debt and its terms is difficult.
For the borrower, enforcement and a possible payment default entry are serious consequences that hinder borrowing for years. Both parties benefit from agreeing realistically at the start and getting in touch immediately if a payment is at risk.
Pitfalls to watch
- Oral agreement. Valid but unprovable. Always a written promissory note.
- Unclear interest. State the annual rate clearly and check it is not excessive.
- Missing repayment schedule. Agree due dates and amounts, not "when you can".
- Personal data. Never publish your personal identity code or bank credentials in a listing.
- Advance fees. An honest private lender never asks for a fee up front — that is a scam.
The full statutes are in the official database: Finlex (finlex.fi). At EU level, consumer credit is regulated by the Consumer Credit Directive (2008/48/EC, replaced by (EU) 2023/2225) — which covers business-granted credit, not a loan between two private individuals.
Frequently asked questions
Does the Consumer Protection Act apply to a loan between two private individuals?
No. The credit provisions of the Consumer Protection Act (38/1978) apply to a business granting credit to a consumer. Between two private individuals the loan is governed by the Promissory Notes Act (622/1947), the Interest Act (633/1982) and general contract law. This is the key difference: a private lender is not bound by the same disclosure and withdrawal rules as a bank or credit company.
Is an oral loan valid?
It is in principle valid, but practically impossible to prove in a dispute. That is why a written promissory note (velkakirja) is essential: it records the parties, the principal, the interest, the repayment and the date.
How much interest may a private lender charge?
Interest is agreed freely, but an excessive rate can meet the definition of usury (Criminal Code, chapter 36 section 6) and may be adjusted under section 36 of the Contracts Act. A safe level is clearly below 20% per year.
Is Vertaislaina24 a party to the agreement?
No. Vertaislaina24 is a classifieds board. We are not a lender, a broker or a party to the agreement, and we do not give legal advice. This page is general information, not legal advice — consult a lawyer in unclear situations.
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This guide is general information, not legal advice. Vertaislaina24 is a classifieds board — not a party to the agreement. Consult a lawyer in unclear situations.