On December 7, 2025, significant new regulations and practical advice emerged for Vietnamese borrowers and lenders alike, reshaping the landscape for those seeking large bank loans and for banks managing bad debts. The Vietnamese government, through Decree 304/2025/ND-CP, has clarified the conditions under which banks can retain collateral assets tied to bad debts, while financial experts and banks themselves are urging borrowers to tread carefully when taking out major loans, such as the increasingly common 2 billion VND, 20-year mortgage.
At the heart of Decree 304/2025/ND-CP is a renewed focus on protecting borrowers’ only homes and essential labor tools, even as banks deal with the mounting challenge of non-performing loans. According to the decree, if a collateral asset is either the borrower’s sole residence or their primary labor tool, the lender can only retain that asset if all requirements in Clause 2, Article 198a of Credit Institution Law No. 32/2024/QH15 (as amended by Law No. 96/2025/QH15) are met. This means, in practice, that the law is drawing a clear line to prevent people from being left homeless or deprived of their main means of making a living due to bad debts—unless every legal condition is satisfied.
The decree goes further, introducing a social safety net for those whose only home is at risk. If the collateral is the borrower’s sole residence, the lender must provide a support payment equivalent to 12 months of the minimum wage. For borrowers whose collateral is their primary labor tool (and it wasn’t purchased with loan funds), the required support equals six months of minimum wage. These provisions, as outlined in the decree, are meant to cushion the blow of asset seizure in the most vulnerable cases.
But what does this mean for the average person considering a large bank loan? Let’s look at the practicalities. Secured bank loans—especially those as large as 2 billion VND for a home or business—are becoming more common, and banks are keen to lend, provided the borrower can meet strict requirements. As reported on December 7, 2025, interest rates for these loans currently range from 8% to 12% per year, and the standard loan term is often as long as 20 years. This extended period allows borrowers to spread out repayments, easing the monthly financial burden.
However, getting approval for such a loan isn’t as simple as signing a few papers. Banks typically require collateral in the form of real estate, land, or other high-value assets, all of which must have clear legal documentation and must not be under dispute or seizure. Borrowers must also prove they have a stable income, a clean credit history (with no bad debts or overdue payments), and a legal, bank-approved purpose for the loan. In addition, borrowers must be Vietnamese citizens aged 18 or older, with full legal capacity and either permanent or temporary residence in Vietnam.
Financial institutions are careful to remind applicants that the loan approval process is rigorous. Applicants need to provide a raft of documents: proof of ownership for the collateral, bank statements showing regular income, tax documents, and utility bills confirming residence. If the collateral is claimed as a sole residence or primary labor tool, the borrower must confirm and verify this status within 10 working days of the lender’s request. Failure to do so means the asset will not be protected under the special provisions of the decree.
For foreign bank branches and debt handling organizations, the new decree imposes additional obligations. Not only must they provide full information to all parties about their rights and responsibilities, but they’re also responsible for making support payments if the collateral falls into the protected categories. The process for asset retention itself must follow the detailed steps outlined in Clauses 3 through 7 of Article 198a of the Credit Institution Law, as amended. This ensures transparency and fairness—at least in theory—throughout the process of dealing with bad debts.
But what about the nitty-gritty of actually paying back a 2 billion VND loan over 20 years? As outlined in recent financial guidance, there are two main ways banks calculate interest: on the outstanding principal (the original amount borrowed) or on the declining balance (the amount remaining after each payment). The declining balance method is now the industry standard. Here, each month, the borrower pays a fixed portion of the principal plus interest calculated on the remaining balance. For example, with a 2 billion VND loan at 12% annual interest over 20 years (that’s 240 months), the first month’s interest payment would be 20 million VND, and the principal repayment would be about 8.33 million VND, totaling roughly 28.33 million VND. The next month, the interest drops slightly as the principal decreases, and this pattern continues until the loan is paid off.
Experts caution that, before signing any loan agreement, borrowers should review every detail of the contract. This includes not just the interest rate, but also all associated fees—such as appraisal costs and prepayment penalties—which can add up quickly. The contract is a legally binding document, so understanding one’s rights and obligations is crucial to avoid unpleasant surprises down the line. Key points to verify include the loan purpose, amount, term, interest rate, all applicable fees, and the detailed responsibilities of both borrower and lender.
Credit history is another critical factor. Banks routinely check the Credit Information Center (CIC) database to ensure applicants have no record of overdue debts. A single black mark can scuttle a loan application, so maintaining a clean repayment record is essential for anyone planning to borrow in the future.
Bank representatives advise would-be borrowers to consider not just how much they want to borrow, but how much they can realistically afford to repay each month—especially over two decades. As one financial expert put it, “If you don’t carefully assess your borrowing needs and repayment ability, you could find yourself unable to meet your obligations.” That could mean not just financial hardship, but also the loss of a home or essential work equipment—unless, of course, the new decree’s protections apply.
In sum, the twin developments of December 7, 2025—the introduction of Decree 304/2025/ND-CP and the renewed focus on responsible borrowing—signal a maturing Vietnamese credit market. The government is striving to balance the interests of lenders and borrowers, offering a safety net for the most vulnerable while urging everyone to borrow with their eyes open and their paperwork in order. As the market continues to evolve, both sides will need to stay informed, vigilant, and ready to adapt to new rules and realities.
