Loan Agreement in Mississippi: Prohibitive Terms and Clauses You Should Be Aware Of
As a lender, the use of the loan agreement in Mississippi allows you to follow up on the payments made by your borrowers because everything about the loan is specified in the agreement. So, in the event of a borrower who defaults their payment or faults you for unfavorable terms, you can always go back to the agreement to show and remind them that it’s what you signed up for. And if a borrower defaults, you will be able to follow the restitution options agreed upon in the agreement. But this agreement isn’t just great for lenders; borrowers need it too because it allows them to negotiate for better terms of payment and even after negotiations, they can go back to the agreement to track their payments and to re-acquaint themselves with what the contract says and what steps it recommends in case of a late payment or the structuring of the repayment plan. A loan agreement is, therefore, the most invaluable document when it comes to loans and everything else that concerns the loan and the parties to the agreement.
Using a free Mississippi loan agreement form, you would be able to create an agreement that is agreeable to you and the borrower. And should you need to come up with a formal agreement that records the loaning of money to a friend or a family member, whether they are offering security for the loan or not, you’d need a promissory note template to prepare a legally binding promissory note.
In addition to being important documents that help both parties stick to their ends of the contract, one other important function of this contract is that it specifies the loan interest charged, a percentage that affects the loan amount directly.
Mississippi Interest Rates
To protect consumers from exploitation, the state has put in place usury laws that have to be adhered to by lenders in the state.
The state has put the legal maximum interest rate on loans at 8%, with Code section 75-17-1 of the statutes noting that the contract rate applicable should exceed 10%, and if at a discounted rate, as specified in Code Section 75-17-, the interest rate should be 5% above the discount rate only. In case of legal judgments, the interest rate applied is the same as the rate of interest charged where a written agreement exists, but in its absence, the rate used will be the annual rate set by the judge.
If a lender contravenes these rates, they’d be forced to forfeit the financial charge and the interest, specifically when the rate charged exceeds the maximum allowable interest by 100%. Otherwise, the borrower might recover the total amount paid, including the interest and principal, and the lender found charging such usurious rates willfully would be charged and guilty of a misdemeanor and fined up to $1000.
These laws on interest rates will not, however, apply to loans on mobile homes, residential real property loans, or joint ventures, partnerships, unincorporated associations, religious societies, foreign, or domestic corporations.
In addition to making sure that the interest rate charged is within the statutory limits, which other terms do you need to review before you sign your loan agreement in Mississippi?
Prohibitive Clauses and Terms to Be Aware Of
Prepayment FeeYou’ve already worked too hard to be able to repay your debt in full before the effective maturity date of the contract, why then should you be forced to pay a certain percentage of what would be the balance, in prepayment fees? One of the most important features that you need to keep in mind when signing the loan contract is that you need to go through every bit of the fine print, and if the agreement proposes a prepayment fee, you can either walk away from the negotiation table or ask the lender to remove it. The prepayment fee is often quite high, and you don’t have a reason to pay it unless you are servicing a qualified mortgage loan, if the loan is a fixed-rate loan, or if you took a high-priced mortgage loan with a high APR.
Credit InsuranceThe other thing that you should watch out for and avoid in your agreement is the option to pay credit insurance. Although most lenders will recommend paying credit insurance, it really is a rip off, and it should be avoided.
Balloon PaymentsWhile most states prohibit lenders from enforcing balloon payments, you need to go through the fine print, and if there is any mention of a balloon payment, then you should reconsider the offer. Keep in mind that a balloon payment structure allows borrowers access to seemingly affordable loans by keeping the monthly repayments significantly low for a certain period, only for you to be slapped by a larger final payment, called the balloon payment. This type of payment is extremely dangerous, and since most borrowers cannot afford to make this lump sum payment, lenders often end up repossessing or even foreclosing on their property. You don’t want this to happen to you, and that means walking away or renegotiating the payment terms.
The other things you need to be wary of include confession of judgments and the waiver of exemptions. The latter protects some of your personal belongings/ property from creditors, even when you file for bankruptcy, but you need to confirm that these terms are airtight because some creditors are known to go behind these laws/ waivers. Regarding confession of judgment, the lender should not take automatic judgment against you when you default.
To get started with a loan agreement with favorable and protective terms in Biloxi, Laurel, Jackson, Mississippi State, Hattiesburg, Tupelo, or any other city in Mississippi, download our free loan agreement form here.