Essential Clauses in Your Loan Agreement in Oklahoma
If you are planning to take a loan, either for personal or business reasons, one of the most important things you have to and need to do is to understand the terms laid out in the loan agreement’s fine print. There is a lot of important information that falls into the cracks when borrowers sign contracts or select I Agree without reviewing and questioning the terms and the clauses in the agreement, and the sad bit is that these terms always come back to bite you since you cannot feign ignorance. What this means is that whether you understand the finance contracts’ jargon and questions prohibitive terms and numbers, or not and have to hire a professional, the smartest move that you will make is to take your time. And ask. Don’t be afraid of asking what the terms mean or the implications that such terms would have on your business or business finances. And the best part is that the lender is obligated to explain everything to you because they are bound by the ethical code of conduct.
If you are new to all this, we recommend that you download the free Oklahoma loan agreement form. This legal loan agreement sample is pretty much a complete and comprehensive sample legal instrument that specifies the important clauses that are incorporated into enforceable loan agreements. With this sample, you will have an idea of what to expect from the agreement, as well as the terms you could negotiate. And if you are planning to lend money to a friend or a business partner and wish to formalize things to prevent blurred lines, protect lender-borrower boundaries, and to respect each other during and after the loan is repaid, this agreement will come in handy for you.
Keep in mind that the loan agreement in Oklahoma is designed to protect both the borrower and the lender at all times. But with the lender always looking for a way to protect themselves, they will identify loopholes in the agreement, things that will help them get back their money in any way possible.
Below, we’ll look at the important clauses in loan agreements, but first, let’s look at one of the critical elements of the loan agreement – loan interest rates.
Statutory Limits on Interest Rates
One important thing to keep in mind when tackling loans and interest rates charged is that the state looks out for consumers, through the setup of usury laws. In the state of Oklahoma, for example, the legal maximum interest rate specified is 6% in the absence of a contract, and if you signed the contract, then the rate specified in the contract will be used. In case of unlawful interests, the entire value of the interest charged will be forfeited by the lender, and the borrower might recover double the interest paid. Banks guilty of charging usurious rates on their loans will be at risk of having their bank charter canceled, and their assets liquidated.
Regarding legal judgments, the interest rate charged is 4% above the treasury bills rates applicable for the previous year, but the rate won’t exceed 10%.
These statutory laws do not, however, apply to small loans, pawnshops, or retail installments – this is specified in the Uniform Consumer Credit Code.
Important Clauses in Loan Contracts
These are some of the essential contracts forming the legal framework for the transactions taking place between lenders and borrowers.
Security for the loan/ Security Cover
This clause specifies that the loan amount has to be covered adequately for the whole duration/ tenure of the loan. Often, the property is used as security for the loan, but in cases where the property isn’t sufficient security, for example, if the property deteriorates or if its destroyed, or if the market price falls, then the lender might ask the borrower to offer more security for safeguarding the outstanding amount of the loan.
Payment of balances
This section provides that if the borrower makes a payment for the loan, but at the time of the payment, they still had pending amounts accrued, say from late processing of payment or even transaction fees, then the payment would be used to offset these amounts first. It’s only after these due payments are made/ covered fully that the loan payment received would be used in the payment of the principal amount of the EMI.
To determine whether you would be charged or penalized for making a repayment in an amount that exceeds the expected/ scheduled payment/ obligations specified in the agreement, you need to review and negotiate for favorable terms on matters prepayments. Often, making this payment in excess means that the amount paid would be readjusted against any outstanding principal, and it might have some implications. But since you are just trying to pay off the loan faster, there shouldn’t be a prepayment penalty fee charged.
Assignment of loan to third parties
The lender is known to change things after the loan is processed, and one of the situations you may have to deal with is a third party managing your loan. Though this might favor the lender, make sure that the loan amount or terms will not be affected by the transfer to a third party.
In case of major changes in your finances from business, employment, or professional changes, even changes in your address or income level, this clause requires that you notify the lender of these changes within an appropriate, specified time.
The steps to be initiated by the lender in case you are unable to meet your repayment obligations per the stipulated terms will be set out here. The implications of the default are specified here too.
Is the lender allowed to change the terms of the loan agreement, and which reasons would necessitate these amendments? The obligations of the borrower and the lender in case of amendments are also specified here.
These are the important clauses you need to be aware of. If you are unsure, consult a legal professional.
To get started with loan agreements in Edmond, Tulsa, Oklahoma City, Norman, Enid, Stillwater, Lawton, or any other city in Oklahoma, download our free loan agreement form here today.