Loan Agreement in Ohio: 3 Clauses That Might Hurt You
A loan agreement (also a loan contract or a business loan agreement/ personal loan agreement) refers to the legally-binding agreement that specifies and regulates the terms/ conditions of the loan extended to the borrower; as a security measure that protects the interests of the lender – by signing the agreement, the borrower promises to repay the loan fully as per the agreed terms, and the lender can use this agreement to pursue legal recourse, in case of a dispute/ default, or any other issues. On the other hand, the borrower needs this written agreement to be aware of the actual terms and other specifics of the loan, to stay abreast of the terms, and to keep track of their repayments, as per the repayment schedule they create. This agreement is also important as it ensures the specification of the relationships between the lender and the borrower, ensuring that there are no blurred lines, meaning that each party knows what is expected of them.
With all the power that the loan agreement wields, this agreement could be used in different circumstances where a loan is being extended to a borrower, and that means that an understanding of the terms outlined in the agreement is crucial. Bear in mind that you cannot feign ignorance once you’ve signed this loan agreement in Ohio. With that in mind, you need to make sure that you have an understanding of everything that goes into the agreement. For that to be possible, we recommend downloading the free Ohio loan agreement form online. The legal loan agreement sample gives an overview of what you can expect from the agreement. You need to also bear in mind that the terms of the agreement are always designed to favor the lender, but knowing what goes into the agreement means that you will be able to negotiate the terms of your loan agreement to favor your financial state. Some of the important considerations that you need to review and immediately negotiate for will be covered below, as will the clauses that need extra attention.
But first, a look at one important component that the state has some control over – the loan’s interest rate. You need to keep in mind that in as much as your credit score and the value of the loan you are asking for affects the interest rates charged, the state of Ohio, like all other states, will determine the laws that apply to the business loan contract.
Statutory Provisions on Usury Laws
The state has capped the maximum interest charged on loans at 8%, and lenders found in contravention of these laws would be liable to a penalty forcing them to repay the borrower all the excess interest paid.
However, lenders might charge interest above 8% if the principal loan amount exceeds $100,000, if the debt is being secured by a deed of trust or a mortgage if it’s a business loan; if the debt is to be paid on demand or if it’s to be repaid in a single instalment and when it isn’t secured by any household goods. The other exception is when the loan is a payment to be made to a broker or even a dealer who is registered in the Securities and Exchange Acts (1934), including all the publicly traded companies.
And in case of legal judgments, the interest rate applied is the same as the contract rate, but in the absence of the written agreement, the courts will set the interest rate at 10%.
Bear in mind that the interest rate is a negotiable aspect of the agreement, as is the repayment schedule, the default terms, or the collateral, among others.
So, now that we have this out of the way, which are the clauses that might hurt you in the future if you are not careful to review them?
Clauses that might hurt you
Clauses that allow for the amendment of the terms of the agreement with or without notice. As mentioned above, the terms of any loan contract are designed to give the lender an edge over the borrower, and even though a contract allowing for the amendment of terms might make you believe that the terms might be favorable to you, later on, you shouldn’t agree to such terms because these amendments are almost always against the borrower’s interests. Don’t forget that the power to amend the contract’s terms, especially when you find yourself struggling to repay the loan, will lie with the lender (bank), and they may take actions that cripple you financially. It’s best to refute such terms on amendments.
Clauses that allows for the fluctuation of the interest rates. Again, such clauses favor the lender, and by empowering the lender to change the interest rates as they deem fit, your repayment schedule might be thrown off, and you will end up paying a very high cost for that loan, especially if the lender gets to change the interest rates depending on the existing changes in the market.
The clauses that allow for assignment favoring third parties. Such a clause would go against the spirit of trust, and you might lose your negotiating power because you are not negotiating with the party you entered the agreement with.
So, in as much you want to get that loan approved fast, you must read and analyze the fine print, and in case of unfavorable terms like the ones above, you’d need to question the terms of the agreement. If these terms are non-negotiable, keep shopping for favorable terms.
Whether you are in Cleveland, Columbus, Cincinnati, Dayton, Toledo, Akron, or any other city in Ohio, you could use our free loan agreement forms to familiarize yourself with the terms of your loan contract or to process that loan contract for your friend/ business partner.