Loan Agreement in Kansas – Important Sections and Covenants to Include
The loan agreement in Kansas refers to the legally binding contract that specifies the agreement between the lender and the borrower. Signed, it means that the lender is willing to provide the loan amount agreed upon on the contract’s effective date (the date it’s signed) while the borrower will be pledging to repay the loan amount in full, as per the agreed repayment schedule. Both parties have to sign the agreement, and by doing so, this agreement protects both the lender and the borrower – the lender is protected because the borrower promises to pay back and if they don’t the collateral provided is used by the lender as a way of paying the outstanding debt. On the other hand, the borrower uses the agreement to track their payment schedule and for record-keeping purposes. This document is also called a loan contract or a business loan agreement.
Note that the loan agreement differs from the promissory note, and despite the similarities between the two, the loan contract is more complex and comprehensive than the promissory note. Also, the promissory note only requires the signature of the borrower only, unlike the contract, which must bear the signatures of the lender and the borrower.
Now that you know what sets these two documents apart, let’s look at the important clauses that must be present in your loan agreement. You also need to bear in mind that you can create the loan contract easily from the comfort of your office or home, thanks to the free Kansas loan agreement form. This form comes with all the important sections, and that means that you will know what to expect and also save time creating the binding contracts.
Important Sections and Provisions of the Loan Contract
Beyond the loan contract’s effective date, naming the parties to the agreement, and specifying the loan amount, below are all other essential components of the loan contract.
The interest rate charged is an important component of the loan repayment schedule, and it specifies how much the lender earns from the loan you get. The interest rate could be fixed or floating variable), and it’s expressed as the Annual Percentage Rate (APR). The state of Kansas, like all the other states, has placed limits on the interest rate that a lender can charge for consumer protection because many lenders would, otherwise, exploit the borrowers. This also means that before you take up the 0% interest credit card loan, you must read the fine print carefully, because there are many cases where these cards attract exorbitant rates. With this in mind, the state has placed the legal maximum rate of interest at 10%, especially in cases where there isn’t any other rate agreed on. In cases where the rate is agreed upon in writing, however, the maximum limit allowed is 15% per annum, unless otherwise authorized to charge higher rates. Note, however, that this 15% interest rate isn’t applicable to loans taken for business or agricultural reasons, mortgage/ real estate laws, or retirement plans (these are considered qualified plans).
For interest rates on judgments, the law permits a 4% rate of interest above the federal discount rate as of the 1st day of July following the judgment.
In cases where the lender is in contravention of the laws, the interest rate charged must be forfeited, and the lender would also have to pay the attorney fees.
Contract Defaults and the Acceleration Clause
In signing this contract, both parties agree to fulfil the promises made. So, if either party fails to fulfil their end of the bargain, the agreement would be in default. The penalties will be specified if the borrower defaults payments. The acceleration clause could be used as a penalty if the borrower fails to fulfil the agreement’s requirements if they fail to make their payments on time.
Proof of Insurance – there should be proof of insurance on the security pledged by the borrower so that if something happens to that asset, insurance will cover the cost.
Life Insurance – in some cases, the lenders of business loans will require that a borrower buys life insurance on their life with the lender named as the beneficiary. When this happens, the lender wants to make sure that they get back their money if something befalls the borrower.
Expenses for defaulted payments – if you default your loan payments or delay in making the prescribed payments, you might have to pay for some of the lender’s expenses, especially if the loan goes to collections. In most cases, the fees charged will include the collection and attorney fees.
Property Taxes and Fees – Before you sign that agreement, you need to make sure that you can pay for taxes and fees associated with the asset used as security for the loan. Doing this ensures the property doesn’t fall behind.
In other cases, the lender might require a guarantee that your business won’t change its management or take on additional debt for as long as they are servicing the loan in question.
Finally, if you are a start-up taking on a huge loan, you might be forced to furnish the lender with periodic financial statements of your business to show your performance and determine whether you will be able to continually pay back that loan.
With all these in mind, go through the fine print carefully and make sure that the terms are fair.
For a loan contract sample in Topeka, Wichita, Kansas City, Overland Park, Olathe, Manhattan, Lawrence, or any other city in Kansas, download our free loan agreement form to get started.