Important Elements of the Loan Agreement in Nebraska

A loan agreement is a legally binding instrument that outlines the terms agreed up by the lender and the borrower in taking the loan. Besides being proof of a credit transaction between the lender and the borrower, the loan agreement in Nebraska is also important because it lays out the responsibilities expected of the lender and the borrower – in this case, the promise to issue the loan amount agreed upon and not to change the terms of the agreement later (unless provided for), and the borrower’s promise to repay the money they receive.

Now, if you are a borrower who’s about to sign a loan agreement, there are considerations that you need to keep in mind. You need to know what you are getting yourself into, and that means knowing what sections are incorporated into the agreement and how they will affect you. To help you get started, you need to download a free Nebraska loan agreement form. Even as a borrower, having a copy of the agreement form allows you to familiarize yourself with all the important aspects of the contract, which makes you even better at negotiating for better terms in case you find that some of the terms offered are unfavorable. You also need to keep in mind that regardless of the urgency of the loan, you must take time to read and review all the terms specified in the fine print. Otherwise, you’d end up with the most prohibitive contract and also a contract that will cost you a lot more in the future. For example, if you ignore to read/ review the terms before you check I Agree or sign on the dotted line, the bank might have to recall the loan at the worst possible time, leaving you without the funds you needed in the first place.

On top of that, there’s the undeniable fact that most lenders will include nefarious terms in the contract, creating unfair Gotcha situations, especially with business owners. Being aware of the bottlenecks incorporated and understanding the actual repercussions of your actions should you fail to do something. Besides reading and reviewing the terms of the agreement, you also need to ask the lender all the tough questions you can think of and ask them to explain those terms to you in the simplest possible manner – no bank and financial jargon. Working with a commercial lawyer would also be a great idea, especially if you don’t understand half of what’s outlined in the agreement.

That said, which are the important elements incorporated into your loan agreement in Nebraska?

First, the agreement will specify the date that the loan becomes effective, and it will also define the parties to the agreement (lender and borrower), who are collectively regarded as Parties.

The next sections include:

• • Specification of the loan amount

    Here, the contract notes that the lender has agreed to loan that loan amount to the borrower at a specific interest rate. Keep in mind that the loan amount is often inclusive of the loan’s principal amount and the interest charged.

    Regarding the interest, you need to know that the interest rate charged is negotiable, but most importantly, the numbers recommended should be agreeable to the state. The state of Nebraska has set the maximum legal interest rate of contractual loans at 16%, and in the absence of a contract, the state laws provide for a 6% interest rate. The interest charged on legal court judgments will be at 1% above the bond equivalent yield, the rate of contract where one is present, or at a rate provided for by the state law. In case a lender is found charging usurious rates, the most common penalty for their actions would be the recovery of the loan’s interest rate only, but in other cases, the penalty is the recovery of the principal along with interest only up to the specified legal contract rate.

    However, these laws are not applicable to the loans issued by the Department of Banking, a loan guaranteed by the federal or the state governments, loans to corporations with a principal of more than $25,000, savings and loans, open credit accounts, as well as the loans offered for agricultural and business uses.

  • Repayment Schedule/ Plan

    This is an important section of the loan agreement as it allows you to determine and sign up for the loan repayment option that works best for you. Whether you will be paying the loan’s interest before the principal and if you prefer to make regular and flexible payments, you need to ensure that you keep in mind factors such as your future income projections, your bargaining power, and your finances/ expenses. Always negotiate these terms before you sign the agreement.

  • Late payments

    What percentage of the balance will you be forced to pay in case you make a late payment?

  • Default

    What steps will be taken by the lender when you default your loan payment?

  • Collateral

    Which of your assets are you offering as security for the loan in case you are unable to meet the repayments anymore?

  • Prepayment

    Before you sign the agreement, ensure that the agreement doesn’t require that you pay a prepayment fee if you choose to make an early payment.

Other sections you need to review include severability, waiver, legal fees, representations/ warranties, and finally, the reiteration of the binding nature of the agreement.

Whether you are in Lincoln, Omaha, Nebraska City, Grand Island, Kearney, North Platte, or any other city in Nebraska, you can access and download our free loan agreement forms here to get started.