Concept, Essential Terms and Form
A term loan facility in Georgia is built on the loan contract regulated by the Civil Code of Georgia: under Article 623 the lender transfers money or another generic thing into the borrower's ownership, and the borrower undertakes to return a thing of the same kind, quality and quantity. What makes the facility "term" is that the repayment date is fixed in advance: under Article 626, where the loan is defined by a term in advance, both the principal and the interest must be paid when that term falls due. This structure distinguishes the term loan from demand arrangements, where repayment is triggered by termination of the contract rather than by a calendar date.
As to form, a loan contract is concluded orally, although the parties may agree on written form under Article 624. Written form matters in practice because the authenticity of an oral loan contract cannot be established by witness testimony alone. For any significant amount, documenting the loan terms and the transfer of funds is therefore not a formality but the borrower's core evidentiary protection in a future dispute.
The Legal Regime of Interest
Interest for the loan may be stipulated by agreement of the parties, and a loan contract secured by mortgage must indicate the monthly interest rate agreed by the parties (Article 625, part 1). The law then caps rates in two layers. First, the annual effective interest rate of the loan must not exceed 50 percent, and this requirement extends to every type of loan, including the annual amount of the monthly rate agreed for a mortgage-secured loan (parts 2 and 3¹).
Second, for a mortgage-secured loan the agreed monthly rate, including the costs connected with the use of the loan (except the costs of notarized certification and registration of the mortgage), must not exceed one twelfth of 2.5 times the arithmetic mean of the market interest rates of loans issued by commercial banks — rates published monthly on the official website of the National Bank of Georgia for the previous calendar year — and this ceiling applies from March 1 of each year (part 3). The term "effective interest rate" is defined by a legal act of the National Bank, which may also set specific rules for computing the outstanding principal and for counting commissions and penalties (parts 6 and 6¹).
Penalties and Consumer Protection Limits
When a loan is issued, the amount of any commission, any financial cost (other than costs already included in the effective interest rate), any penalty imposed for breach of any contractual term and any financial sanction must not exceed 0.27 percent of the outstanding principal for each day (Article 625, part 5). For the purposes of this cap, the law excludes the one-off penalty of no more than 20 GEL (or its equivalent in foreign currency) charged upon overdue, as well as any early repayment commission charged in cases of refinancing or early repayment.
Cumulatively, upon each overdue event, all commissions, financial costs, penalties and sanctions together must not exceed 1.5 times the current outstanding principal. Where the loan is refinanced or repaid early with the consumer's own and/or third-party funds in the manner prescribed by the Code, the lender is prohibited from imposing an early repayment commission, penalty or punitive sanction that exceeds 2 percent of the outstanding principal (part 8).