Elements of the Loan Agreement in Alaska
If you are looking loan or you are a lender, you need to make sure that the terms of your agreement are the best possible for you, offering protection and also ensuring that you are paying only what you are supposed to pay. To ensure that both the lender and the borrower are protected, the state requires that a legal document outlining all the terms of an agreement on the money borrowed, either by an entity or an individual, is drawn up. This document is the loan agreement, also called a promissory note, term loan, note payable, a business loan contract, or a loan contract. The contract outlines the terms of the agreement, including interest rates and terms of the loan, and the details of the parties involved.
If the lender charges interest plus fees (prepayment or late fees), these details must also be incorporated in the agreement. Note that for the agreement to be enforceable, both parties to the agreement, lender(s) and borrower(s) have to sign the document. Note that the loan agreement is unlike the promissory note in that the promissory note will only need the signature of one party, often the borrower. With this in mind, the loan agreement is often the preferable document when it comes to handling loans. There’s also the fact that the loan agreements are more comprehensive, and they provide many more details about the loan and the terms applicable. Promissory notes are, therefore, preferable for the simple, short-term loans.
Note that the loan agreement in Alaska protects lenders by working as the only document that legally enforces a borrower’s promise/ pledge to repay a loan applied for/ borrowed, either in lumpsum or regularly.
The borrower benefits from the agreement, too, because it spells out all the details of the loan, either to make sure that you never miss payments and also for your records.
What’s Included in A Loan Agreement
One of the elements that must be covered in the loan agreement is how the payment will be made. Generally, this section covers how much the borrower will be paying to the lender. In most cases, the payment method can be in regular monthly installments (or any other forms of installments) or in a lump sum.
This amount represents the total amount of money that the lender lends the borrower. It includes the interest charged on the loan amount in percentages, as well as the interest added to the principal (this is the original amount that is loaned to the borrower).
Using a free Alaska loan agreement sample, you get to outline all the important elements of the loan and the agreement, and one of the crucial sections has to do with the applicable interest rates. Like all the other states, the state of Alaska has statutory limits on the interest charged to a borrower.
However, these are some of the specifics you should know about:
For loans without loan contracts (absence of contracts), the limit to the interest rate that can be charged is 10.5%, this is 5% more than the legal interest rate for express loan contract agreements. However, this interest rate is not applicable to loan contracts that have a principal amount exceeding $25,000
Borrowers who pay a usurious interest rate would be able to recover as much as twice the amount of paid-in interests within a period of 2 years.
For interest rates applicable to judgments, the rate is 3% higher than the discount rate of the 12th Federal Reserve District, as effectuated on the 2nd day of January of the year that the judgment is entered. The exception to this comes about where there is a contract action in which case the contract rates would be used.
The loan agreement includes collateral or the security that the lender uses against the money borrowed. Security is important in case the borrower is unable to repay the loan, and it could be in the form of equipment, a vehicle, jewelry, etc. Promissory notes also may or may not come with collateral, which is why the short term loan amount loans come with unsecured promissory note documents.
This section will also outline when the loan would have to be repaid in full. The state accepts two repayment schedules – fixed date or a demand loan agreement/ notice to repay. In the latter case, the lender would issue a repayment notice for 14 days, for example, and the borrower has to repay that money within the said timeframe.
The repayment schedule would also include the frequency with which the money would be repaid, the amount to be repaid, and the exact date when the payment will be due.
Details of Borrower and the Lender
All the important legal documentation of the borrower and the lender will be included in the agreement. Often, the information required by the lender will differ depending on the lender and the money the borrower borrows. However, the most important piece of information that must be present in the agreement includes the social security number, name, legal address, phone number, and signature.
To get started with a loan agreement in Wasilla, Juneau, Anchorage, Fairbanks, Homer, Sitka, or any other city in Alaska, get our free loan agreement form here.