[Case].
In order to expand production, a food processing factory needs to purchase a batch of new production equipment, considering the problem of capital turnover, the food processing factory decided to take out a loan from the bank. After providing the relevant written materials, the food processing plant quickly signed a written contract with the bank. The contract stipulates that the bank will provide a loan of 2 million yuan with a loan term of two years. After the contract is signed, when the food processing factory goes to the bank to withdraw the money at the agreed withdrawal time, the bank will release the balance to the food processing factory according to the balance after deducting two years of interest. The food processing plant filed a complaint with the bank, which said it had to deduct it early in order to ensure that it could recover its interest. So, is the bank's approach legitimate?
According to Article 670 of the Civil Code, the interest on the loan shall not be deducted from the principal in advance. If the interest is deducted from the principal in advance, the loan shall be returned according to the actual amount borrowed and the interest shall be calculated.
Accordingly, in this case, the bank, as the lender, should pay the total amount of the loan to the food processing factory in accordance with the contract, and cannot deduct the interest generated by the total loan amount in advance, otherwise the loan principal of the food processing plant will be virtually reduced and its expected economic income will be affected.
Can the interest on the borrowed money be deducted from the principal amount in advance?