Loan Agreement in South Dakota: Watch Out for These Clauses Before Signing Your Loan Agreement

What is the first thing that you look out for/ consider before you sign on the dotted lines of your loan agreement? Do you ever stop to think about what would happen if you signed the loan agreement only to suffer for it later because you didn’t review or analyze the terms of the agreement to determine whether they are reasonable or not if you would afford to pay for the cost of your mistakes? Because you really should. The terms of a loan contract will always favor the lender/ creditor, but you can enjoy a great deal of financial reprieve if you read and understand the terms of the agreement and if you question them, even asking for the removal of some of the prohibitive terms. Of course, you won’t always win, but you have a fighting chance and the option of working away if you don’t agree on fairer terms.

Using the downloadable free South Dakota loan agreement form, you will have an overview of what to expect from your lender before you sign off on the loan offer. This loan agreement sample allows you to familiarize yourself with the terms of the contract, and if the creditor incorporates prohibitive clauses, you can question them or leave that offer on the table. Don’t forget that this contract is legally binding, which means that you will be held accountable for and suffer the implications if you ignore boilerplate terms or assume that you have no right to negotiate for better, more reasonable terms.

That said, an understanding of the state laws that affect your loan contract, for example, the statutory specifications for interest rates, is crucial. Before you click I Agree on your online loan application and before you sign on the dotted lines on the printed contract, you need to know that the state has put in place limitations on the interest rates acceptable. For starters, the legal maximum interest rate acceptable in the state of South Dakota is 15% in written contracts, and in the absence of a written contract, the maximum rate of interest is 12%, the same as the maximum interest rate applied to legal judgments. Penalties for usury isn’t specified as they were repealed in 1982 (July). It’s also important to know that these laws aren’t applicable to agreements made under the Uniform Credit Code Security agreements, real estate mortgages, as well as regulated lenders and the revolving charge accounts.

Clauses You Need to Watch Out For in Loan Contracts

Don’t be in a rush to sign the loan agreement in South Dakota because the terms incorporated into that agreement might have some unfavorable boilerplate conditions. Some of these clauses include:

• • The acceleration Clause

    Think of the acceleration clause as this conditional requirement/ rule that gives the lender the power to force you to pay the rest of your loan immediately if you default your loan or break any other terms in the agreement, for example, if you don’t pay taxes on the security item or if you default on a single payment. Avoid contracts with such clauses, and if possible, find the option of reinstating the loan amount before the foreclosure of your home or repossession of property.

  • Balloon Payments

    If the deal on your loan application is too good to be true, you should avoid it because it probably is. The truth is that some creditors are out there to make money in any way possible, and if you work with such lenders, you might end up with a loan that the lender knows you will automatically default on. These loans feature an extremely low rate of the monthly repayment, but the final payment is often too high (ballooned), a figure that most borrowers cannot pay off all at once. Since you might not be able to repay the loan all at once, we recommend against such loans or provisions in loan agreements in support of the balloon payments. Note that if you are unable to make that final payment, the conditions of this type of loan repayment model might give the lender the right to repossess your property or foreclose on your home, and the sad bit is that you cannot feign ignorance. If your contract has this clause incorporated, ask for a different payment plan. Also, beware of unscrupulous lenders who might assure/ promise you that you could refinance with them just before the large payment is due. The federal laws might be against such loan payments, but you can’t be too sure.

  • Attorney Fees

    If you are required to pay the attorney fees in case of defaulted payments, you need to make sure that the interest charged is reasonable.

  • Confession of judgment

    This provision gives lenders the right to make an automatic judgment against you in case you default on your payment, even without taking you to court.

  • Credit Insurance

    This is often a ripoff, and it guarantees payment in cases where the borrower is unable to pay off their debt in full. It is a ripoff.

  • Prepayment Penalties

    Avoid loan contracts with prepayment penalties on the loan if you choose to repay your loan early. Note that the federal laws will only permit prepayment penalties for new mortgages if the loan is on a fixed APR and the interest cannot be adjusted, if the mortgage is a qualified mortgage, or if it’s not a highly-priced mortgage loan.

To get started with loan contracts in Sioux Falls, Pierre, Aberdeen, Rapid City, Brookings, Spearfish, or any other city in South Dakota, download our free loan agreement form here.