Loan Agreement in New York: Everything You Need to Know About the Terms of the Loan Agreement
A loan agreement refers to the legally-binding contract drawn up between a lender and a borrower. This contract regulates and specifies the conditions of the loan being extended to the borrower. In other cases, the loan agreements are also used for the regulation of securities lending, but in either case, this agreement is often in written form. It’s also called a loan contract, a business loan agreement, or a persona loan agreement, and it can be used for student loans, business, real estate, and personal loans. Now, while the loan contract is referred to as the promissory note by some people, there are some differences between these two financial instruments.
For starters, the loan agreement is significantly more comprehensive in terms of the clauses and sections covered, and it’s also enforceable only after it’s signed by both the lender and the borrower. On the other hand, the promissory note is rather simple, only specifying the loan amount, parties to the agreement, the loan’s effective date, the date that the borrower is expected to repay the money, and only the signature of the borrower. With these differences in mind, the promissory note is often used only between close family or friends.
Now, if you are planning to take out a loan or if you are planning to provide a loan, you’d have to sign a loan contract, but before signing it, we recommend first downloading the free New York loan agreement form. This loan agreement form will serve as a template to help you understand what you need to review before putting pen to paper, or clicking ‘I Agree.’ In essence, the sample loan agreement form gives you a comprehensive overview of what you need to know about the contract you are planning to sign. If using the promissory notes, the sample form used is the promissory note form.
The differences and the use of sample loan agreements cleared out, here are some of the important sections/ elements of the loan agreement that you need to be aware of before you sign the agreement.
Important sections in Business Loan Agreements
Below are some of the important sections for your consideration in the New York loan agreement.
The loan’s effective date
This is the date that the lender and the borrower sign the agreement. It’s also the date that the lender disburses the agreement amount of money to the borrower.
Parties and Relationships
The parties to the loan agreement represent the lender and the borrower(s) who agree to enter into the legal contract. The relationship between the lender and the borrower must be specified in the agreement too. If a co-signer is there to help the business, they would be named too.
As the name suggests, this is the amount of money that the lender is willing to offer the borrower. The value of the loan amount represents the principal plus the interest charged on that loan amount. Note that the interest rate charged can also be added to the principal amount loaned.
Speaking of the interest rates, an understanding of the applicable interest rates to the loan is an important element, and you need to be aware of the rate of interest applicable to your loan before you sign off on it because the interest rate might be higher than the state allows. In other words, the rate could be usurious. With that said, the reasonable maximum rate of interest that can be charged in the state of New York is 16%, while the rate applied to legal judgments is 9%. And if a lender is found guilty of committing usury, the usurious notes would be deemed void, and the borrower might recover the amounts charged in excess of the legal rate. In case the guilty party is a bank, a trust company, or a savings/ loan company, the interest would be forfeited, and the borrower might recover up to twice as much the value of the interest that is paid. The exception to these laws includes debit balances on the customer accounts, either with a dealer or a broker.
Loan repayment terms
Before you sign off on the loan contract, it would be a great idea for you to review the terms of the agreement, in terms of the monthly repayments, repayment duration, hidden fees, and the other important features of the loan. The best part is that these terms of the loan contract are negotiable, which means that you need to go through the draft terms by the lender then ask for lower interest and review all the other terms before signing off on the agreement.
The other important consideration that you need to keep in mind is the security or the collateral the lender is asking for, and whether you would be willing to give that asset up or not. Between personal and commercial property, stocks, and ownership control over your property, what would you be willing to sacrifice in the worst-case scenario?
What would happen in case of a delayed payment or if you are unable to make payment? Lenders layout terms that are meant to favor them, which means that in case you delay or fail to make your next payment on time, you might lose everything. To protect yourself, you should consider reviewing the terms of the agreement, and also ask for more reasonable terms.
Once all these terms are ironed out, then you can sign off on the agreement.
To get started with your loan agreement in Albany, New York, Buffalo, Rochester, Yonkers, Syracuse, New Rochelle, or any other city in New York, download our free loan agreement form here.