Private loans between individuals are among the most common financial transactions in everyday life, particularly within family relationships, friendships, and informal commercial dealings. Despite their apparent simplicity, such loans frequently give rise to complex legal disputes due to the absence of proper documentation, disagreements over interest, or disputes regarding the true nature of the agreement.
This article aims to provide a comprehensive legal framework governing private loans, clarify when interest is lawful, identify situations in which disputes arise, and explain evidentiary rules under both Egyptian and Turkish law.
I. The Legal Definition of a Private Loan
A loan is a contract whereby one party (the lender) undertakes to deliver a sum of money or fungible property to another party (the borrower), who is obligated to return an equivalent amount upon the agreed maturity date.
Private loans are characterized by:
Reliance on personal trust
Lack of banking or institutional involvement
The possibility of being interest-free or interest-bearing
A high likelihood of civil or commercial disputes
II. The Legal Nature of Interest in Private Loans
🔹 Interest Under Egyptian Law 🇪🇬
Egyptian civil law permits the agreement on interest in private loans, provided that:
The interest is explicitly agreed upon
It does not exceed the statutory maximum
Accordingly:
If no interest is agreed → no interest is due
If interest exceeds the legal limit → the court may reduce it
If exploitation or abuse of need is proven → the interest clause alone may be nullified
⚠️ Interest is never presumed and must be clearly established through written agreement or admissible legal evidence.
🔹 Interest Under Turkish Law 🇹🇷
Under Turkish law, interest (Faiz) is legally permissible in private loans, subject to:
Compliance with statutory interest limits
Absence of unlawful exploitation or coercion
Key features of the Turkish system include:
Judicial protection of contractual balance
Court intervention to adjust excessive interest
Preservation of the loan contract even if the interest clause is invalid
III. When Does a Loan Become Unlawful or Usurious?
From a purely legal (non-religious) perspective, a loan may be deemed unlawful if:
The interest rate is grossly excessive
The lender exploits the borrower’s weakness or urgent need
The contract imposes unfair or oppressive terms
In such cases:
The principal loan remains valid
Only the interest clause may be annulled or reduced
The court restores contractual fairness between the parties
IV. Methods of Proving a Private Loan
🔹 Proof Under Egyptian Law:
Acceptable methods of proof include:
Written loan agreements
Receipts acknowledging payment
Bank transfers
Judicial admissions
Written correspondence
Witness testimony (subject to legal restrictions)
⚠️ Loans of significant value generally require written proof; witness testimony alone is often insufficient except in exceptional circumstances.
🔹 Proof Under Turkish Law:
Turkish courts recognize:
Bank transfer records
Digital and electronic evidence
Emails and written messages
Informal (non-notarized) contracts
Written and digital evidence carry significant probative value compared to oral testimony.
V. Common Causes of Disputes in Private Loans
Denial of the loan’s existence
Disputes over agreed interest
Claims that the amount was a “gift”
Uncertainty regarding the repayment date
Allegations of repayment without proof
Use of checks or promissory notes as security without clear agreement
VI. When Does the Dispute Give Rise to Legal Liability?
Depending on the circumstances, disputes may result in:
Civil liability: claims for repayment and interest
Commercial liability: if the loan relates to business activity
Criminal liability: in cases involving fraud, forgery, or breach of trust
VII. How to Avoid Disputes in Private Loans
To minimize legal risks, it is strongly recommended to:
Draft a clear written loan agreement
Specify:
Loan amount
Repayment period
Method of repayment
Interest rate (if any)
Document all payments and transfers
Avoid reliance on verbal agreements in financial matter.
VIII. The Role of a Specialized Lawyer in Loan Disputes
A qualified lawyer plays a crucial role by:
Assessing the legality of the loan
Reviewing the validity of interest clauses
Determining the strongest evidentiary strategy
Representing clients before courts
Negotiating settlements
Protecting clients from exploitation or bad-faith claims
Conclusion
A private loan is not merely a friendly or informal arrangement; it is a legally binding contract that may result in serious long-term obligations. Proper documentation and legal awareness remain the most effective safeguards against disputes and financial loss.
📌 Golden Rule:
Trust alone is not enough — written agreements protect relationships before they protect rights.