Things Included in the Loan Agreement in New Hampshire
A loan agreement, also called a loan contract, money lending agreement, personal loan agreement, business loan agreement, or a promissory note, refers to the legally binding agreement between a lender and a borrower (individual or business). This agreement represents a written promise to fulfil your obligations, either as the lender of the borrower. For example, the lender promises to give the borrower the agreed amount of money, even as they use the agreement as a protection policy because the agreement will be used to enforce the pledge made by the borrower to repay the loan by the agreed time, either in lumpsum or in partial movements. This agreement is also beneficial to the borrower because it will spell out all the details of the loan, not just for keeping track of records, but also for record-keeping.
Now, as mentioned above, the loan agreement in New Hampshire is also called the promissory note, and that might be a little confusing, but the truth is that these two legal documents have some differences. Although they serve the same purpose – an enforceable agreement that shows that the borrower agrees to pay the loan provided, these two documents are used in different circumstances. The promissory note is often used when a small amount of money is lent to a friend or family, and it only needs the signature of the borrower. The loan contract, on the other hand, is more comprehensive, needs the signature of the lender and the borrower to be enforced, and it’s often used for personal loans, business loans, real estate loans, student loans, etc.
Now that we have these basics out of the way, let’s look at the important sections that you need to incorporate into your loan contract. It’s also worth noting that you don’t have to create a loan contract from scratch, all thanks to our free New Hampshire loan agreement form, which comes pre-filled with all the important sections of the agreement, meaning that your only work would be to fill it out and specify those terms.
Important Sections of the Loan Agreement
This is the date that the lender and the borrower sign the loan contract, and it is the effective date because it’s the date that the money you applied for is disbursed to you.
The parties to the agreement, lender, and borrower are identified, and the relationship between the parties specified/ defined.
The value of money that the borrower needs and how much they will pay back will be specified in the loan contract. The loan amount is inclusive of the interest rate charged, which means that the loan amount is the total amount of money that the borrower would have to repay.
Speaking of the interest rate charged on the loan, it’s worth noting that the interest rate charged by the lender should be within the limits put up by the state, and lenders found charging usurious rate rates would be penalized. The maximum allowable legal rate of interest in your New Hampshire loan agreement is 10% unless the rate specified in the agreement is different and agreeable to the parties. In the case of legal judgments, the interest rate would be determined by the Treasurer of the state.
CollateralThe other important section covered in the loan contract is the collateral for the loan. Collateral represents the security for the loan you are applying for, and though you can pledge pretty much anything, you need to find ways of protecting yourself or your business. For example, it wouldn’t be smart for you to pledge your business as security for the loan because losing control and ownership of your loan would be terrible.
If you are getting a loan from the bank, the bank would demand collateral in the form of an asset that would be easy to liquidate, manage, or lease, in the event of a defaulted loan. Keep in mind that you might also have to sign a security agreement when it comes to collateral as a way of granting liens on tangible and intangible assets/ property. Finally, you should be wary of the lenders whose agreement terms include provisions granting the lender the permission to convert your outstanding debt/ loan into stock, and since most lenders would want to exercise this right at any time, you should avoid a contract with such terms.
DefaultWhat would happen if you are unable to make a repayment on time? Do you understand all the consequences of the default terms? Besides the potential loss of the property pledged as collateral, defaulting a loan often results in an increase in your administrative burden, and with the lender/ bank able to do whatever it wants in case of default, you need to negotiate the default terms and the period that you’d have before they foreclose.
Some of the strategies that you could put in place to soften the provisions of the agreement include the insistence on the cessation of any underlying penalty once the default is waived or cured. The other options would include the inclusion of a generous cure period for any breaches, and the addition of materiality or knowledge qualifiers.