Hello, this is Attorney Lee Kyung-jun of Cheongchul Law Firm. While handling fraud cases, I am often asked, “How can a court determine whether the borrower truly had no intention of repaying from the beginning?” In short, the absence of intent to repay is not judged solely by the outcome. Courts examine both the objective circumstances at the time of borrowing and the borrower’s subsequent conduct. Because this issue determines whether criminal liability arises, understanding the specific criteria is essential.

1. Because intent to repay is an internal state of mind, it is inferred from objective circumstances

Whether someone intended to repay is fundamentally a question of internal intent. If the party simply asserts “I intended to repay,” such a claim is not easily refuted on its own. Conversely, it is rare in practice for anyone to openly admit, “I never intended to repay from the beginning.”

As a result, investigative authorities and courts cannot rely solely on the party’s statements. Instead, they must infer intent from the objective circumstances at the time of borrowing, including the borrower’s financial condition, income structure, existing debts, ability to raise funds, and the circumstances surrounding the loan, in order to determine whether there was a substantive intent to repay.

2. Mere failure to repay is not enough

Fraud is not established merely because a debt was not performed. Business failure, investment losses, or sudden economic crises can realistically make repayment impossible.

For example, if a person borrowed funds for a business while having a certain level of income or expected returns, but later failed due to unforeseen circumstances, the matter is more likely to be treated as a civil default. The mere fact of non-payment does not, by itself, establish that there was no intent to repay from the outset.

3. Lack of repayment capacity at the time of borrowing is a critical factor

By contrast, where the borrower had no meaningful assets or income at the time of borrowing and no realistic means of repayment, the analysis differs. For instance, if someone with no steady income and significant existing debts borrows additional funds, normal repayment can hardly be considered objectively feasible.

In such cases, merely asserting “I intended to repay” is insufficient. Courts will closely examine whether there was a concrete plan or means of repayment. If no such circumstances exist, it becomes more likely that the borrower will be deemed to have lacked any intent to repay from the start.

4. Whether the borrower deceived the lender about repayment capacity is also a key criterion

Beyond a mere lack of repayment capacity, whether the borrower deceived the lender about that capacity is another important factor. For example, if someone with no actual income or excessive debts presents themselves as having a stable job, or claims that a large sum is about to come in, in order to induce the lender’s trust, this can be recognized as a “deceptive act.”

When important facts that influence the lender’s decision are misrepresented or concealed, the case can rise from a simple default to fraud.

5. The use and circumstances of the funds are also reviewed

How the borrowed funds are used after the loan is another important factor. For example, if someone borrows money stating a specific purpose but instead spends it on gambling or personal consumption and depletes it within a short time, this may be evaluated negatively in terms of intent to repay.

In particular, when the funds are rapidly exhausted right after borrowing, with no apparent consideration or plan for repayment, the borrower may be suspected of having lacked any intent to repay from the start.

6. Subsequent conduct is also important evidence of intent

The borrower’s conduct after the loan is also a key indicator. Where the borrower makes at least partial repayments, maintains contact with the lender, explains a repayment plan, and makes efforts to resolve the matter, it is generally difficult to conclude that there was no intent to repay from the beginning.

Conversely, if the borrower avoids contact, disappears after receiving the money, or repeatedly borrows funds in similar ways, this may raise suspicion that there was no intent to repay from the outset. These circumstances are evaluated not in isolation, but as part of the overall pattern of conduct.

7. Ultimately, intent is judged by the totality of objective circumstances

Whether the borrower lacked intent to repay from the beginning is not determined by any single factor. Courts consider the totality of circumstances, including financial condition at the time, the existence of repayment capacity, how that capacity was represented, how the funds were used, and the borrower’s subsequent conduct.

In particular, whether there were objective means of repayment at the time is a very important criterion. If no such means existed at all, the likelihood of being judged guilty of fraud increases substantially.

The determination of “no intent to repay from the beginning” in fraud cases is made very specifically and cautiously. Because it depends on the objective circumstances seen across the entire course of events, not just the result, it is essential to carefully assess whether your situation may develop into a criminal matter. As the appropriate response can vary greatly depending on the specific facts, please make sure to organize the facts and review your response strategy from the earliest stage of the case.