How to Negotiate Better Terms for the Loan Agreement in Hawaii

Before you take out a personal or a business loan, you need to double-check the terms of the loan to make sure that they are favorable to you – favorable in that the repayment terms should be financially reasonable for you and also, terms for defaulted payments, collateral, and cosigners/ guarantors.

Essentially, these terms will be outlined in a loan agreement, or a loan contract also called a promissory note. This loan agreement refers to the legally binding agreement that outlines the loan repayment schedule for the loan offered to a borrower by the lender. This agreement names the parties to the agreement, and it could be used in personal and business settings. By defining all the terms of the loan, this agreement ensures that the lender is protected because of the signed contract in which the borrower pledges to repay the full amount of the money borrowed, either in a lump sum or through regular payments. The borrower also needs a copy of the personal/ business loan contract for their records because the agreement spells out the terms and details of the loan. The loan agreement in Hawaii also makes it easy for the borrower and the lender to track their payments.

If you are a lender or a borrower looking for a system that ensures proper recording of the loan and you don’t have any sample loan agreement documents, you will be happy to know that you can easily download a free Hawaii loan agreement form online to get started. Remember that the free loan agreement template is more or less a complete document because it comes with all the essential sections in the agreement. The template also comes in handy because it helps you know more about the terms and the aspects of the contract that you can negotiate. In as much as the lender offers a draft repayment schedule after your loan application is approved, the draft is often filled with boilerplate terms and provisions that don’t have the borrower’s best interests. The repayment schedule, for example, is a negotiable instrument. But most people aren’t aware of this, and they take the draft agreement at face value. To ensure that you are signing a loan contract that is financially viable for you, here are some of the key provisions that you need to focus on.

• • Interest Rates and the Repayment Terms

    Save for the loan amount; you need to be careful about the interest rate charged by the lender along with the repayment schedule proposed. While the state of Hawaii stipulates that the legal maximum interest rate for loans where there is no established contract is 10%, 10% rate for all legal judgments, and a 12% upper limit for all written contracts, the rates are still highly negotiable, especially if you have a good credit score. At the end of the day, however, knowing what the state limits are on interest rates is a smart thing because you will be protected from exploitation. The state’s penalty for Usury includes the creditor recovering the principal amount only, and the debtor might recover the extra costs. The creditor might also be fined up to $250 and/or face imprisonment of up to 1 year.

    When coming up with the repayment schedule, you need to negotiate for better terms based on your relative bargaining power, revenue projections, and your financial capability. Generally, this schedule should be flexible enough for you to avoid a loan default.

  • Negotiate terms to avoid defaulting payments

    With your revenue projections and financial capability in mind, you need to negotiate terms that ensure your utmost protection to avoid and in the event of a default. And with a breach in the Hawaii loan contract likely to affect your personal or business finances adversely, it’s important to negotiate terms that ensure you have a buffer. If you are getting a business loan, you need to (lenders will also put in place measures) work on strategies that protect your numbers – if it means drawing and delivering periodic financial reports to your lender or even maintaining specific balance sheet ratios, do it. You also need to evaluate your finances and audit your creditworthiness and ability to continue paying that debt in case you are slapped by a litigation claim, if planning to set up a subsidiary, or if you are considering hiring a new senior officer.

    At the same time, it’s important for you to soften the provision put in place by the lender to ensure your protection in the event of a default. A generous cure period, material qualifiers/ knowledge, and the incorporation of the minimum/ maximum dollar limits are some of the things you could do. And, you also need to make sure that you understand all the ramifications of a defaulted loan payment.

  • Collateral

    Before you pledge collateral, be certain that you will be willing to lose whatever you are pledging as collateral in case you fail to pay the loan. You also need to remember that the lender will choose security to be in the form of something that is easily liquidated, and if the property, it should be easy to manage or lease.

To get started with loan agreement in Honolulu, Hilo, Kailua-Kona, Kailua, Volcano, Lahaina, Kahului, or any other city in Hawaii, download our free loan agreement form here.