Loan Agreement in North Carolina: Unenforceable Contracts

To create a legally binding and enforceable contract in North Carolina, you will need to download a free North Carolina loan agreement form. This form allows you to review the terms of the loan agreement in North Carolina, and it’s advisable that you have your own draft loan agreement before you sign any loan agreements.

It’s important to keep in mind that the loan agreement is a legally binding agreement which stipulates the terms of the agreement, covering everything from the loan’s effective date and the parties to the agreement to the interest rates charged, loan amount, collateral, and terms of default, among others.

You also need to review the interest rates charged and whether they are acceptable statewide or not. Like all other states, the state of North Carolina has imposed restrictions and maximum rates of interest on the loans to avoid lenders from charging usurious rates. The maximum rate of interest that could be charged is 8%, although lenders could charge significantly more for loans under $25,000. The contract rates may also change if the loan is more than $25,000. Lenders found guilty of usury would have to forfeit all their interest, and the borrower may recover as much as double the interest that’s paid. The rate applied to judgments is 8%, but in case the rate is written, it will the rate applied. These terms of interest do not, however, apply to the home loans that are secured through a mortgage or in the first trust of deed, as well as equity lines of credit, loans offered to corporations, as well as loan and savings associations.

What this means is that in as much as you might be trusting of your bank agent, you have to review the terms provided then negotiate the terms. That said, there are some unenforceable contracts that you should be aware of before you sign the agreement.

• • Lack of capacity

    While it’s assumed that the parties to the agreement will understand the terms of the agreement fully, the truth is that there are instances where one party might be unable to decipher those terms appropriately, and that is where this bit of the contract comes in handy. In such cases where one of the parties is incapacitated, either mentally or otherwise, the incapacitated individual would not be in a position to make a sound financial decision, and that means that the agreement would be unenforceable then. The unenforceability of the agreement is also applicable where the other party signing the agreement is too young or too old to fully understand the implications of the agreement. Thanks to such terms, unscrupulous persons or businesses would not take advantage of the incapacitated person.

  • Duress

    The agreement will also be unenforceable if the borrower signs the agreement under duress or if they are being coerced. So, if it's discovered that the borrower signs the agreement when not in their best selves, the contract would then be invalidated. Blackmail is the other element that would make the contract unenforceable.

  • Contract signed Under the Influence

    Alcohol and all other forms of recreational drugs impair judgment, which means that when making a loan application when inebriated or when not in your full senses, you might be overly optimistic, which means that you might agree to loan terms which are not reasonable/ fair, and you might sign the agreement without going through every inch of the fine print. The lender might have you sign a contract that forces you to lose everything in case you default your payment. We’ve seen this happen all around us, but you don’t want to be a victim. The good news is that if there is evidence that the agreement was signed when you (borrower) were under the influence, the contract would be deemed void or the terms renegotiated.

  • Nondisclosure

    A loan agreement in North Carolina is also non-enforceable if there are nondisclosures or misinterpretations, which is basically what haps when one party fails or neglects to disclose some of the most important aspects of the deal or the agreement. In such cases, the courts would take into consideration a number of issues to help them decide whether the party failed to disclose the information or nor, and if the defending party would have accessed that information from other sources or not. So, before you sign an agreement, the parties have a duty to disclose all important/ material facts. Nondisclosure is often a breach of contract.

    The other important clauses that would make the contract unenforceable include public policies, mistakes, or where one party has unequal bargaining power, and in other cases, where the terms of the agreement are unfair.

Now that you know what you need to watch out for in loan agreements, we’ll help you get started on the right foot.

Whether you are in Charlotte, Wilmington, Raleigh, Greensboro, Asheville, Durham, or any other city in North Carolina, you can download our free loan agreement form, here, to get started.