What it is (and why the name matters little)
Call it a loan, financing or mutuo: legally, when someone transfers ownership of a sum of money and the other party undertakes to return an equivalent amount, there is a mutuo contract (loan-for-consumption) (Federal Civil Code, art. 2384). If, in addition, consideration for the use of the money is agreed, it is a mutuo con interés (interest-bearing loan-for-consumption) (Federal Civil Code, art. 2393). What matters is not the title of the document, but that its clauses accurately state what the parties want.
Interest: free, with a safety net
The parties set whatever rate they want — higher or lower than the statutory one. But the Code itself provides the counterweight: if the interest is so disproportionate as to give well-founded grounds to believe the lender abused the debtor's financial distress, inexperience or ignorance, the judge may equitably reduce it down to the statutory rate at the debtor's request (Federal Civil Code, art. 2395, the doctrine of lesión). And in credit instruments, the First Chamber of the Supreme Court (SCJN) has additionally developed the usury doctrine — we address it in depth in the maximum legal interest on a loan.
- Civil statutory interest: 9% per year (Federal Civil Code, 2395) — applies if the parties agreed on interest but not the rate.
- Commercial default interest (statutory fallback): 6% per year (Commercial Code, 362) — if the loan is commercial and the parties did not agree on a default rate.
Civil or commercial?
A loan between individuals with no commercial purpose is governed by the Civil Code; when one of the parties is a merchant or the money is used for acts of commerce, we are dealing with a commercial loan (Commercial Code, arts. 358–364). The distinction matters for the default interest rules, the statute of limitations and the procedural route. In professional practice, the transaction is documented so that the route is clear from day one.
The clauses that cannot be missing
- Complete parties and identification (and the joint obligor, if any).
- Amount and form of delivery — ideally by transfer, so the disbursement is traceable.
- Ordinary rate and default rate, stated separately and expressed over a clear period (annual/monthly).
- Term and payment schedule, with an amortization schedule attached.
- Collateral (mortgage, pledge, guarantor) and its formalization.
- Prepayments: whether they are allowed and how they are applied.
And the lock that cuts across all of it: fecha cierta (certain date) (ratification before a notary or other certifying officer, or registration), so that the contract holds against third parties and not just between the two of you. A verbal mutuo, or one on a loose sheet of paper "on a handshake," is collectible in theory and terribly expensive to prove in practice.