Loan Agreement in Virginia and Personal Loans Traps to Avoid
A loan agreement is a legally binding instrument between the lender and the borrower. It outlines the terms of the loan that the borrower and the lender agree to by signing this agreement, and it also lays out the responsibilities and the obligations of the parties to the agreement. It’s also called a loan contract, a promissory note, or a business loan agreement, and like other contracts, this loan agreement in Virginia is designed to honor and protect the interests of both the lender and the borrower.
To help you figure out what you are getting into and the provisions that will call for your attention, consider downloading the free Virginia loan agreement form. This loan agreement form sample familiarizes you to the terms of the loan contract that you will be signing, and an understanding of what this document has to offer or what it’s all about will allow you to make a more reasonable decision regarding provisions in the contract, for example, the repayment schedule and the terms for default. This contract also gets you prepared for the negotiations because you will have the details of the agreement that you might need clarification of or editing.
That said, these are the important sections in loan contracts that you need to pay attention to:
- The loan’s effective date
- The loan amount and interest rates
- Repayment schedule
- Default terms, waivers, and cure period
The effective date is the date that the loan offer is approved and signed, and also the date that the money is released by the lender. All the other sections of the agreement affect the cost of the loan and implications of delays and non-payments, and they are negotiable.
Before we look at some of the common traps in personal loan applications and the one possibly set by lenders/ creditors, let’s first look at the usury laws in Virginia.
These are the laws that govern the interest rates charged by lenders, and the penalties faced by lenders who break the usury laws. Knowing these laws means that lenders will not overcharge you, and it’s also an important piece of information when negotiating the terms of your loan agreement.
The state of Virginia has capped the maximum rate of interest at 8% unless you have a written contract that specifies a different interest rate. The maximum rates on legal judgments are also specified at 9% or the rate specified in the contract, whichever is higher of the two. Lenders found guilty of breaking these laws will be penalized, and the borrower might recover twice as much as the total interest paid, and the lender will also be responsible for the attorney fees and the court costs.
These usury laws do not, however, apply to the revolving credit accounts, state and national banks, loans secured by trust deeds or mortgage, loans from credit unions, installment credit plans, loans to private universities or colleges, as well as savings and loans.
Traps to avoid in personal loans
1. Overlooking the loan contract
First, the biggest mistake and the biggest trap you must avoid is signing a loan contract before reviewing the fine print. You might be in a hurry to secure the loan, but if you don’t pay attention to the terms of the contract and boilerplate terms, you will end up with an extremely pricey loan contract, and the worst bit is that the cost of the loan might eventually cost more than double the loan you received because of high APRs, fees, and penalties.
2. Hidden Application and up-front fees
To make the loan expensive without your knowledge, some lenders will charge high origination and up-front fees to process our loan application, and these fees added to the interest. While this is acceptable, the lender is required to indicate this in the contract beforehand, and you should only sign off on the loan if the terms are reasonable. Reviewing the terms of the agreement is also important because the lender might add a provision that allows them to change the fees whenever. But you need to know exactly what you are getting yourself into before signing the agreement.
3. Running to the No-Credit-Checks Lenders
Run for your life if a lender is not interested in your credit score and history. A big red flag in the lending world is when a lender has no interest in your history, and signing up for such loans would be a huge death trap. Keep in mind that any legit lender will qualify for a loan, even the high-interest loans only after they’ve reviewed your credit. So, if this is not a requirement, you might want to reassess your options.
4. Being Forced to get loan insurance
The other trap you should be aware of has to do with loan insurance. Unless you are looking for a home mortgage and you cannot come up with the down payment, avoid any loan that requires you to take on loan insurance.
The other traps you should avoid include nice loan perks that disappear after one late payment, prepayment penalties, or being pressured to do extensions or rollovers.
For help with loan contracts in Norfolk, Richmond, Charlottesville, Roanoke, Virginia Beach, Alexandria, or any other city in Virginia, download our free loan agreement form here today.