A comprehensive loan contract between lender and borrower. More detailed than a promissory note — covers collateral, default, representations, and both parties' obligations. Use for larger or more complex loans.
A loan agreement is a comprehensive contract between a lender and a borrower that sets out the terms of a loan — amount, interest rate, repayment schedule, collateral, and consequences of default. It's more detailed than a promissory note and provides stronger legal protection for both parties.
Loans over $5,000 · Loans with collateral · Commercial loans · Multi-year repayment · Complex payment schedules · When you want comprehensive legal protection
Small personal loans · Short-term IOUs · Informal arrangements · Loans between trusted parties · When simplicity matters more than detail
Not legally required but highly recommended for loans over $5,000. Notarization costs $5-$25 and significantly strengthens enforceability. Required in some states for secured loans.
Yes, for simple business-to-business loans up to ~$100,000. For larger commercial loans, especially those with business assets as collateral, use an attorney-drafted commercial loan agreement with proper UCC filings.
Each state has a maximum interest rate (usury limit). Personal loans typically capped at 10-12%. Business loans often higher. Rates above the state maximum may be unenforceable or even criminal. Check your state's rates.
The lender can seize the collateral described in the agreement. For real estate, this requires foreclosure (takes months, varies by state). For vehicles and personal property, repossession rules vary — some states allow direct seizure, others require court order.
IRS requires minimum interest (Applicable Federal Rate) on loans over $10,000. Charging below AFR may trigger gift tax. For loans over $100,000, additional imputed interest rules apply. Consult a tax advisor for large family loans.