Ready to use legal template

Drafted by experienced lawyers

Compliant with Indonesian law

Ready to use legal template

Drafted by lawyers

Compliant with Indonesian law

HomeBusiness contractsLoan agreement

Learn more about Loan Agreement in Indonesia

Loan agreement is a legal document that certifies the borrowing between persons. It defines the nature of the loan for tax reasons and prevents it from being considered a gift. It enables you to formalize the loan and preserve a written record of it. If one of the borrowers is unable to repay the loan or disputes the loan agreement between individuals, the cash in question can be recovered.In the event of a disagreement or dispute, this instrument, also known as a personal loan contract or master promissory note, protects the parties. Our loan agreement is tailored to local legislation and drafted by qualified lawyers. Get your personalized personal or corporate loan agreement in English from Themis Partner.

Table of contents


What is a Loan Agreement in Indonesia?

Borrowing agreements are legally binding contracts entered into by two or more parties to formalize the loan procedure. Loan agreements can range from basic promissory notes between friends and family to more comprehensive contracts such as mortgages, auto loans, credit cards, and short- or long-term payday advance loans. Simple loan agreements can be nothing more than a few short letters outlining how long a borrower has to repay money and how much interest will be applied to the principle. Others, such as mortgages, are complex contracts that are registered as public records and allow lenders to repossess the borrower’s property if the loan is not repaid in accordance with the terms.

What is included in the Loan Agreement?

The loan contract should include several crucial facts as standard:

➤ The parties' personal informations
➤ The loan's total value
➤ Payment plan agreed upon
➤ The interest rate
➤ Final loan repayment deadline
➤ Collateral security note (if any)

How to draft a Loan Agreement under Indonesian law?

Any Loan Agreement specifies the loan’s terms, rights, and obligations, but different types of loans may require different specifications to meet local and national regulations, so verify with your local government. If you meet these conditions, you will be allowed to seek legal assistance if the other party fails to comply with the provisions of the Loan Agreement. A personal loan contract between individuals does not need to be as complex as one involving banks, organizations, or finance companies. Individuals should, however, have a documented loan contract to refer to so that both parties are aware of their responsibilities.

Why is Loan Agreement important?

A loan agreement is a critical component of borrowing money. Without one, neither party is protected if the loan terms are violated. A loan contract is required for a variety of reasons, including:

➤ It assists you in negotiating the best possible offer. The devil is in the details, and this is especially true when it comes to loan negotiations. A loan contract details the fees that you may be able to avoid, such as an application fee, a monthly maintenance fee, or a prepayment penalty.
➤ That is your proof. The loan agreement safeguards you against the IRS. It proves that the money you received was a loan and not a gift, which could result in a tax event.
➤ There is no doubt. The loan contract specifies the loan's terms, including payback terms, interest rate, and fees. This manner, everyone is aware of what is expected of them.
➤ It obstructs change. Without a loan agreement, your lender may raise your interest rate or demand additional costs, and you will be compelled to pay. On the other hand, it protects the lender in the event that a borrower is late with a payment or defaults on the loan.

What is the role of the Loan Agreement?

A loan contract’s major purpose is to define what the parties are agreeing to, what responsibilities each party has, and how long the agreement will endure. A loan contract should be in accordance with state and federal standards in order to protect both the lender and the borrower if any party fails to follow the agreement. Depending on the loan type, the loan contract terms and which state or federal laws control the performance requirements needed of both parties will differ.

What is the interest rate in Indonesia?

The interest rate in Indonesia, as determined by Bank Indonesia, has recently seen an adjustment. In April 2024, the central bank unexpectedly raised its key 7-day reverse repurchase rate by 25 basis points to 6.25%. This decision was taken to stabilize the rupiah exchange rate amidst global economic challenges and to ensure that inflation remains within the target range for the coming years. The increase also affected the overnight deposit facility and the lending facility rates, which were adjusted to 5.5% and 7%, respectively. This move reflects the central bank’s commitment to maintaining economic stability and controlling inflation in the face of a fluctuating global economy.

What other documents should be considered for a loan?

1. Deed of Mutual Covenant

A Deed of Mutual Covenant must also be signed if necessary. The Deed of Mutual Covenant (DMC) is a contract that is often only applicable to multi-unit or multi-story buildings. It governs the rights of the owners as well as any subsequent owners of the unit.

2. Memorandum of Transfer

The Memorandum of Transfer is another document that the buyer may be required to sign (MOT). Purchasers of finished subsale developments will be able to sign the MOT immediately, albeit payment will be required.
Purchasers of developments that are currently under construction must wait for the development to be completed and for about 6 months before signing the MOT.

What happens if there is no contract and a disagreement emerges?

When loan contracts with friends fall through, things may get a little dicey. Not only is your friendship at stake, but so is your money if you are the lender in this agreement!
A formal agreement can help prevent this, but what if no such written agreement exists? The good news is that you are not completely lost. If there is no formal written agreement, it is the lender’s job to demonstrate to the courts that a loan obligation existed. You’ll have to demonstrate:

➤ Money was really loaned to your pal
➤ That the loan was not simply a gift
➤ It was decided to return the loan

Ask our Lawyers

Ask a qualified lawyer to draw up your own tailor-made contract

CONTACT US

Share information

Why Themis Partner ?

Make documents forhundreds of purposes

Hundreds of documents

Instant access to our entire library of documents for Indonesia.

24/7 legal support

Free legal advice from our network of qualified lawyers.

Easily customized

Editable Word documents, unlimited revisions and copies.

Legal and Reliable

Documents written by lawyers that you can use with confidence.

DOWNLOAD NOW