🤝 Loan Note Builder
Both rate thresholds — the 20% cap and the 4.6% tax reference — are built into the document.
| Lender | Lender address | ||
|---|---|---|---|
| Lender date of birth | Lender tel | ||
| Borrower | Borrower address | ||
| Borrower date of birth | Borrower tel |
Article 1 (Principal) The Lender lent KRW to the Borrower on , and the Borrower received it. Transfer account:
Article 2 (Interest) 1. Interest is % per year. 2. The Borrower pays interest on the th of each month to the account designated by the Lender. 3. Under the Interest Limitation Act the agreed rate may not exceed 20% per year.
Article 3 (Maturity and repayment) The Borrower repays the entire principal by to the account designated by the Lender.
Article 4 (Guarantee and collateral) This agreement has no separate guarantee or collateral.
Article 5 (Acceleration) If the Borrower is two or more interest payments in arrears, the benefit of time is forfeited and the full outstanding balance becomes immediately due upon the Lender's demand. Article 6 (Late damages) Overdue amounts accrue late damages of % per year until full payment.
| Date | Lender signature | Borrower signature |
|---|---|---|
| Date: (Sign) | Date: (Sign) | Date: (Sign) |
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- TitleLoan agreement · 12/12
- PartiesParties (full) · 12/12
- PrincipalArt.1 Principal · 12/12
- InterestArt.2 Interest (standard) · 12/12
- RepaymentArt.3 Lump sum · 12/12
- Guarantee / collateralNo guarantee or collateral · 12/12
- Special termsArt.4 Acceleration & late damages · 12/12
- Date & signatureDate + both signatures · 12/12
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Harbor Mist
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- Title
- Parties
- Principal
- Interest
- Repayment
- Guarantee / collateral
- Special terms
- Date & signature
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⚠️ Interest above 20% per year is void as to the excess and criminally punishable in Korea. For family loans, actual repayment records matter more than the note itself. This tool is for reference and is not legal or tax advice.
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What this tool does
A loan note records that money was lent and received. Korean law prescribes no fixed format, but if the parties, amount, loan date, maturity or interest term are missing, disputes follow. Loans between family members deserve special care because the tax authority presumes such transfers are gifts, so you need both the paperwork and an actual repayment record. Two rate thresholds matter. The Interest Limitation Act caps agreed interest at 20% per year; anything above that is void and criminally punishable. Separately, tax law treats 4.6% per year as the reference rate, and lending below it may create a taxable benefit. This tool embeds both thresholds in the document text and flags the items that cause problems when omitted.
Who uses this
- A parent lending housing funds to a child without it being treated as a gift
- Lending to an acquaintance where a verbal agreement feels unsafe
- A loan that may end up in litigation if unpaid
- Preparing for notarization but unsure which clauses are needed
- Lending interest-free and wanting to check the tax position
How to use
- 1Pick the tone. Polite gives a simple note, neutral a standard agreement, firm a detailed version for notarization.
- 2Include addresses for both parties. Names alone make later identification difficult.
- 3State the principal and loan date, and note the bank account if the money was transferred.
- 4Set the interest. State it even if the loan is interest-free.
- 5Always include a maturity date, otherwise default cannot be determined.
- 6Both parties sign or seal. Without the borrower's signature it is hard to enforce.
Interest-free ceiling for family loans
Korean tax law uses a reference rate of 4.6% per year and treats the shortfall in interest as a benefit. If that benefit is KRW 10 million or less per year, no gift tax applies. Dividing 10 million by 4.6% gives roughly KRW 217 million as the interest-free ceiling. For example, lending KRW 200 million interest-free creates a benefit of 200 million x 4.6% = KRW 9.2 million, which stays under the threshold. If partial interest is charged, multiply the principal by the difference between the reference rate and the actual rate. Note that even within the ceiling, a complete absence of repayment can lead the authority to treat the loan as a gift.
Examples
KRW 200 million interest-free, parent to child
Under the roughly KRW 217 million ceiling, so no gift tax arises. Still set a maturity date and keep bank records showing actual principal repayments.
10% per year to an acquaintance
Valid, as it is within the 20% statutory cap. Adding an acceleration clause lets you claim the whole balance after a few missed payments.
Planning to notarize
A notarial deed allows enforcement without litigation. Prepare the detailed version including addresses and a jurisdiction clause before visiting a notary.
Frequently asked questions
What is the maximum interest rate?
20% per year under the Interest Limitation Act. Excess is void, and receiving it carries up to one year imprisonment or a fine of up to KRW 10 million. The cap fell from 24% to 20% on 7 July 2021.
What if no interest is agreed?
The statutory rate of 5% per year under the Civil Act may become an issue. If you intend an interest-free loan, say so explicitly.
Do family members need a written note?
Yes. The tax authority presumes family transfers are gifts. However, a note without actual repayments can still be treated as a gift, so bank transfer records matter more than the paperwork.
Is an interest-free family loan taxed?
Not if the principal is around KRW 217 million or less, because the benefit computed at 4.6% stays under KRW 10 million per year.
Is notarization required?
No, but a notarial deed lets you enforce without a lawsuit, which speeds up recovery considerably.
Is my input stored?
No. Input stays in your browser and is never included in the share link.
Cautions
- •Interest above 20% per year is void as to the excess and criminally punishable.
- •For family loans, an actual repayment record matters more than the written note.
- •Cash handovers make the loan itself hard to prove. Use a bank transfer.
- •Have a lawyer or tax adviser review large or collateralized loans before signing.
- •This tool assists with drafting and is not legal or tax advice.
Last reviewed: 2026-08-29