Loan Agreement in Maryland: What Happens If You Don’t Sign A Loan Agreement?
A loan agreement is one of the most important legal instruments in the financial and even social world because it allows a lender access to the borrower’s words (and assets – collateral) that they will pay back the money borrowed as per the agreed terms and within the agreed period. It also makes sense to a borrower because this legally-binding instrument reminds them of what they agreed to – repay the loaned money at the stipulated interest rate from the effective date specified in the schedule until the loan is repaid, or risk losing their valued assets in case of repayment. In addition to creating a sense of responsibility, this contract would also allow the borrower to keep track of their repayments and to have a reference point in case they have other financial obligations that may or may not be affected by the loan.
With these in mind, it’s important for you (the borrower) to sign the agreement, as long as you’ve gone through the terms, negotiated, and determined that the terms provided are the best in the industry. We say this because it would be a big mistake for you to sign a loan agreement whose terms are unfavourable to you, especially because you can find lenders that offer loans with favourable and reasonable rates and terms
Some of the provisions that you can negotiate in the agreement include:
Why sign a loan agreement?
If you are offering a loan to a friend, family, or an acquaintance, creating and enforcing a comprehensive loan contract with all the important clauses might feel like much like overkill, but putting pen to paper after a review of the terms promises to protect you and even help you many unnecessary complications. For example, a friend may eventually take the loan as a gift and not repay it. For you to recover your money should anything go wrong, you need an agreement. And you need to remember that we are all past verbal and handshake agreements.
A written agreement is also important because it leaves no doubt in the minds of the lender and the borrower about the terms of that agreement, specifically matters that pertain to the terms of the loan’s repayment. By doing all that, the agreement helps in avoiding any and all manner of hassles that often crop up when you try to get your money back.
The written loan agreement, regardless of the relationship you have with the borrower means that you will not have unnecessary arguments on the repayment of the loan and this type of contract could be the kind of thing that allows you to keep a solid relationship with your friends/ family, especially if they stick to the terms and you don’t have to repossess their car because of an unpaid debt.
It’s also worth noting that a loan agreement that is negotiated and agreed by both parties allows the borrower to repay the loan at their pace because the borrower works out a payment plan that works well for you.
With all these benefits in mind, you need to work on creating a comprehensive legal loan agreement that checks all the boxes in ensuring the protection of the lender and the borrower. To get you started on the right path, we recommend downloading the free Maryland loan agreement form. This form is an editable sample loan agreement form that comes with all the important sections that will help you create a legally enforceable contract.
Whether you are dealing with a commercial or a personal loan, this agreement form guides you on everything you need to know about the agreement.
One of the crucial elements covered by this agreement is the loan’s interest rate. The interest rate affects the total loan amount, which affects the repayment schedule and period by extension. Before you sign the agreement, you need to make sure that the interest rates are within the state limits.
Loan Interest Rates in Maryland
Before you sign the loan agreement in Maryland, you need to know that the state-mandated maximum limit on interest rates stands at 6% in the absence of written agreements, and 8% if there is a written agreement. And lenders found contravening this law will be forced to forfeit as much as 3X more in the charges and the interest collected, or $500, whichever is greater. The state also stipulates the maximum interest charged by the courts on judgments at 10%.
However, you need to know that these interest rates aren’t applicable to the mortgage secured loans, unsecured loans that are only secured by savings, instalment loans not secured by any real property, instalment sales contracts for consumer goods like motor vehicles, as well as open-end retail accounts.
In addition to the interest rates, the other important aspects of the agreement include the collateral for the loan, terms for default, co-signers, late/ collection fees, penalty, and how to deal with insolvency.
Once all these terms are agreed upon, the lender and the borrower would have to sign the agreement.
If you need to create a loan agreement in Rockville, Baltimore, Annapolis, Bethesda, Frederick, Ocean City, or any other cities in Maryland, we’ll help you get started easily with our free loan agreement forms available here.