Loan Agreement in Kentucky
2 Important Things to Consider Before Signing Loan Application in Kentucky
If you are planning to apply for credit any time soon, there is a whole load of factors that you need to take into consideration as you review the terms of your loan and also before you put pen to paper. You don’t want to cry foul over mistakes that could be avoided. In addition to you income, current monthly payment obligations, and your employer’s contact information (when necessary), there are several other considerations that you must keep in mind in a bid to make sure that the terms of the agreement are favorable and that you can actually pay back the loan on time. Take a look at the following considerations:
Loan Agreement in Kentucky
One of the most important documents that you need to understand and use before taking or giving out a loan is the loan agreement in Kentucky. Also called a promissory note, a business loan agreement, or a loan contract, the loan agreement in Kentucky refers to the legally-binding, and albeit complicated legal instrument that not only protects but also binds the parties to the agreement (two or more). This agreement details the terms of the loan, covering everything from the names of the parties to the agreement, the amount of money being lend, and the specific requirements that pertain to the loan and its repayment.
In this agreement, the repayment schedule is drawn up and the loan’s repayment period, loan amount, whether the payment is to be made partially in installments or in a lump sum, and when the repayments are to be made, are all covered.
If you are the one planning to give out a loan, whether to a family member, a friend, or an acquaintance, you need to make sure that you have a loan agreement drawn up, and if the amount of money being loaned isn’t as much, then you need to have the borrower sign a promissory note stating that they will repay the amount owed by a certain date, via a specific instrument. Terms of default might also be specified in the promissory note, and in the event of a secured promissory note, the asset that the borrower puts up as collateral specified.
If, on the other hand, you prefer a comprehensive outline of the terms of your agreement and you wish to incorporate airtight provisions and clauses, then the loan agreement would be a preferable option for you. And we’ll help you get started easily with our free Kentucky loan agreement form. This form is a sample loan agreement document that guides and tells you about all you need to do to create a favorable and a legally binding agreement. The sample loan contract has all the important sections that must be present in the agreement, and it specifies what the terms of the loan’s repayment will be, the steps to be taken in the event of defaulted payments, penalties applied, as well as the specifications of the collateral.
All you need to do is to download your sample loan agreement in Kentucky, tweak the terms to meet your needs and agreement, then sign it, and just like that, you will have an enforceable, binding agreement.
Loan Interest Rates
The other important consideration when it comes to loan agreements is the rate of interest for the loan. This needs to be specified in the agreement as well. The whole reason why we’re addressing the matter of interest rates as an individual subject has to do with the fact that the state has put in place specific measures to ensure that vulnerable consumers are not exploited through inflated interest rates. And just like all the other states, the state of Kentucky has put in place specific measures and terms on interest rates to ensure fairness. All the terms that govern interest rates are specified in the Statutes under the Revised Status Chapter 360, which covers Interest and Usury.
Under the statutes, the maximum acceptable legal rate of interest in the state is 8%, unless you agree on different terms. And even when you agree on a different interest rate, the rate cannot be more than 19% or 4% the discount rate of interest provided by the Federal Reserve Bank: or whichever is less. And this rate will only apply to loans whose principal doesn’t exceed $15,000.
Then you have the interest rates on legal judgments by the courts – the interest rate applicable in the judgments doesn’t exceed 12%.
The state has also put in place specific terms on the high-cost home loans as a way to address things like predatory lending. To this end, the state has limited residential mortgages of between $15,000 and $200,000 that have a closing cost exceeding $3,000 or not more than 6% of the total value of the loan. Also, these lenders cannot charge any prepayment penalties, unless the offer to the borrower has a prepayment penalty agreed upon by the lender in the initial agreement documents. Even then, the prepayment penalty charged cannot be more than 3% in the first year, 2% in the second year, and 1% in the third and subsequent years. And where a late payment fee is charged, it cannot be more than 5% of the due amount.
The only exceptions to these terms include the fact that banks are allowed to only charge a minimum loan fee of only $10, credit unions are barred from charging anything more than 2% on unpaid balances, and small loans not exceeding $15,000 are charged a lower interest rate of 3% per month.
That said, lenders who flout these laws will have to pay, and a borrower who is charged a higher interest rate than is acceptable would recover up to 2 times the interest paid. Lenders who offer loans for high-cost homes may have to charge different loan rates or provide the appropriate restitution.
So, before you sign a loan agreement, you should confirm that the loan rates are favorable and within the acceptable state limits.
To get started with your loan application and agreement documentation in Frankfort, Lexington, Louisville, Bowling Green, Owensboro, Paducah, or any other city in Kentucky, download our free free loan agreement form here.