Alaska Loan Agreement

Introduction

Key Things to Know

1. 1

   A loan agreement records an Alaska lender's money and the borrower's promise to repay it, with the amount, the rate, and the due dates set down in writing; a loan whose principal is more than 25,000 dollars is exempt from the state interest ceiling.

2. 2

   Alaska caps the contract rate on most private loans. Under Alaska Statutes Section 45.45.010 the parties may not agree to more than the greater of 10 percent per year or 5 percentage points above the rate charged member banks by the 12th Federal Reserve District. Banks and licensed lenders follow their own statutes.

3. 3

   A loan whose principal exceeds 25,000 dollars is exempt from the rate cap. Alaska Statutes Section 45.45.010 lifts the interest limit once the principal is more than 25,000 dollars, so a large private loan may set a higher agreed rate in writing.

4. 4

   If a written loan agreement does not state a rate, the legal rate on money after it is due is 10.5 percent per year (Alaska Statutes Section 45.45.010). Always write the agreed rate into the agreement so this default rate does not apply by accident.

5. 5

   You do not need a license to make an occasional private loan. An Alaska Small Loans Act license is required only of a person engaged in the business of making loans of 25,000 dollars or less at a higher rate (Alaska Statutes Section 06.20.010), regulated by the Division of Banking and Securities.

6. 6

   Put the loan in writing and keep a late fee reasonable. A written, signed agreement is far easier to enforce, and any late charge should be a reasonable estimate of the lender's actual costs from a late payment rather than an arbitrary penalty.

7. 7

   Spell out default and acceleration, and mind the deadline to sue. Define what counts as default, include an acceleration clause so the lender can demand the whole unpaid balance at once, and remember a lawsuit on a contract must be filed within three years (Alaska Statutes Section 09.10.053).

Alaska Requirements for Loan Agreement

• Maximum Interest Rate (Usury Cap)

  Alaska caps the contract rate on a private loan of 25,000 dollars or less at the greater of 10 percent per year or 5 percentage points above the rate charged member banks by the 12th Federal Reserve District (Alaska Statutes Section 45.45.010). State the rate as a number and keep a smaller private loan at or below that ceiling unless you are an exempt or licensed lender.

• Large Loans Over 25,000 Dollars Are Exempt

  A contract or loan commitment in which the principal amount exceeds 25,000 dollars is exempt from the Alaska rate limit (Alaska Statutes Section 45.45.010). This threshold is the key Alaska rule: at or below 25,000 dollars the cap applies, and above it the parties may set a higher agreed rate in writing. Confirm the size before you rely on the exemption.

• Legal Rate When the Contract Is Silent

  If a written loan agreement does not state an interest rate, the legal rate on money after it is due in Alaska is 10.5 percent per year (Alaska Statutes Section 45.45.010). Always write the agreed rate into the agreement so this default does not apply by accident, and keep the agreed rate within the applicable cap on a loan of 25,000 dollars or less.

• Lender Licensing (Alaska Small Loans Act)

  An Alaska Small Loans Act license from the Division of Banking and Securities is required only of a person who engages in the business of making loans of 25,000 dollars or less at a rate higher than a non-licensee could charge (Alaska Statutes Section 06.20.010). An individual making an occasional private loan is not in the business of lending and generally does not need a license. If you lend money repeatedly as a business, confirm whether you must be licensed before you lend.

• Put the Loan in Writing

  A loan need not be written to be enforceable in Alaska, but writing it down is strongly advised. An agreed rate must be set by express agreement of the parties (Alaska Statutes Section 45.45.010), and a written contract carries a three-year period to sue (Alaska Statutes Section 09.10.053). Have both parties sign and date the agreement and keep a copy.

• Late Fees Must Be Reasonable

  Alaska does not set a flat statutory late-fee cap for a private written loan. A late charge is enforceable as a reasonable estimate of the lender's actual costs from a late payment, not as a penalty. Set any late fee in an Alaska loan agreement as a reasonable amount tied to your real costs, and keep total charges within the applicable interest limit on a loan of 25,000 dollars or less.

• Default and Acceleration

  Define default clearly, usually a payment missed past a stated grace period, a broken promise in the agreement, or the borrower insolvency. Include an acceleration clause so that on default the lender may declare the entire unpaid balance of principal and accrued interest immediately due. Stating any required notice and cure period avoids disputes about whether acceleration was proper.

• Time Limit to Sue on the Debt

  A lawsuit to collect on a loan agreement must generally be filed within three years in Alaska, running from the default (Alaska Statutes Section 09.10.053, covering actions on a contract). Because that period is relatively short, keep a signed written agreement and act promptly. Confirm the current deadline before filing, since it can turn on when the last payment or written acknowledgment was made.