Enforcing A Loan Agreement in Arizona
Where money is involved, you want to make sure that the contracts and agreements you make with your business partners, friends, and family are airtight. A defaulted loan payment is nothing anyone wants to deal with, and though there are numerous cases where you cannot do much about it, the defaulted payment, especially where your family is involved, there are many cases where the lender would have protected themselves. As a result, the search for a loan in today’s financial market means having all the right documents and agreeing to actually pay for the loan on the agreed date.
For centuries, loans have been offered by financial institutions, individuals, and loan sharks, but even when there weren’t reliable means of creating written agreements, there always have been agreements drawn up in one way or the other. In traditional settings, this agreement would be in the form of a verbal promise, but in the presence of a witness, and with the borrower providing collateral for the loan. Today, we all know that you cannot trust verbal or handshake agreements, and that is where the loan agreements and promissory notes come in.
A loan agreement is a contractual agreement between the lender and the borrower in which the borrower agrees to repay the loan amount borrowed (plus interest) by a specific date, either in a lump sum or in regular payments. In this agreement, the interest rate is stipulated, and the collateral for the loan specified. If the amount loaned is significant, the lender would have to value the collateral before agreeing on the loan amount, just to make sure that they will get their money back in the event of a defaulted payment. The loan agreement in Arizona is also known as a loan contract, a business loan agreement, and in cases where the loan involves a short term, a small amount, the contract is sealed with a simple promissory note. Unlike the loan contract, the promissory note is simple, with fewer sections, and it’s only enforced once signed by the borrower.
What Makes A Loan Agreement Enforceable?
If you are planning to extend a loan to your friend, family, or even business, it would be a good start to make sure that you have an agreement drawn up. The good news is that you don’t really have to go to a lawyer’s office to get started or to acquire the right documentation since you can download a sample loan agreement online. Using a free Arizona loan agreement form, you’d create an enforceable contract. All you have to do is to make sure that all the important sections of the agreement are filled out and the document duly signed. Below, we look at the basics of the agreement, what should be in the secured promissory note and what must be included in the loan agreement.
This amount represents the total amount of money that the lender is lending the borrower. Interest is charged on the amount of the loan and then added to the principal to give the original loan amount to be loaned. When the loan amount, plus the interest, is not expected to change, the interest rate applied is fixed. In other cases, however, the interest applied is compound interest, and this will vary the monthly payment and the balance. With compound interest, the interest is charged on the principal value, in addition to the amount of interest that was previously accumulated. At the end of the day, the compounding interest principal leaves you with a high-interest rate.
With lenders known to engage in unscrupulous lending activity, often charging steep interest rates on loans, which is the maximum interest rate that lenders can charge? Well, the state has set the maximum rate of loan interest at 10% p.a. and any rate below 10% could be agreed upon and the contracted. If a lender charges higher rates, the penalty for usury is the forfeiture of all the interest, and the usurious interest payments will be deemed to have been made towards the principal. In cases where the payments by the borrower exceed the loan’s principal, legal judgment is given in the debtor’s favor, at a rate of 10%. The interest charged on judgments is at an allowable rate or a rate that’s agreed upon, as long as it doesn’t exceed the rate permitted legally.
Collateral is the security that the lender takes should the borrower forfeit or default payment. Collateral makes loan agreements in Arizona secured loan agreements. It applies to other debt payment promises as well, and you can have secured promissory notes or unsecured promissory notes.
The loan repayment reschedule is an outline of when the loan would be repaid. The schedule options include the fixed date and the notice/ demand to repay the loan agreement. In the latter schedule, the borrower is required to pay back the loaned amount within the agreed timeframe.
The payment method refers to the method of payment that the borrower intends to use to pay back the lender. The payment could be in lumpsum or in one regular payment.
Details of the borrower and the lender
Lenders often specify the details they need from the borrowers, including the documents to be presented, including other essentials like social security. Once all the necessary documents are submitted, the lender and the borrower have to sign the document to ensure that both parties agree to the terms of the agreement.
To create your loan agreement in Mesa, Phoenix, Scottsdale, Tucson, Tempe, Chandler, Sedona, or any other city in Arizona, download our free loan agreement form here today.