Arizona Loan Agreement

Introduction

Key Things to Know

1. 1

   A written loan agreement sets out an Arizona lender's advance, the borrower's promise to repay, the amount, the payment dates, and the interest rate; because the state sets no usury ceiling on a written loan, the 10 percent legal rate applies only when the contract names no rate.

2. 2

   Arizona sets no interest ceiling on a written loan. Under Arizona Revised Statutes Section 44-1201, if the parties contract in writing, any rate of interest may be agreed to. The 10 percent figure is only a fallback that applies when a different rate is not put in writing.

3. 3

   If a written loan agreement does not state a rate, Arizona law sets the rate at 10 percent per year (Arizona Revised Statutes Section 44-1201). To charge a higher rate you must state it in a written agreement, which is exactly what makes the higher rate lawful.

4. 4

   You do not need a license to make an occasional private loan. A consumer lender license is required only of a person engaged in the business of a consumer lender (Arizona Revised Statutes Section 6-603), administered by the Department of Insurance and Financial Institutions, with exemptions in Section 6-602.

5. 5

   A person in the business of consumer lending is licensed and regulated. Even though private parties may agree to any written rate, a lender who makes consumer loans as a business must be licensed and follow consumer-protection rules, so repeat lending is different from a one-off personal loan.

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 written contract must be filed within six years (Arizona Revised Statutes Section 12-548).

Arizona Requirements for Loan Agreement

• Maximum Interest Rate (No Ceiling on a Written Loan)

  Arizona sets no usury ceiling on a written loan. Under Arizona Revised Statutes Section 44-1201, if the parties contract in writing, any rate of interest may be agreed to; the 10 percent figure applies only when a different rate is not put in writing. State the agreed rate as a clear number, since on a written Arizona loan that stated rate is what governs.

• Legal Rate When the Contract Is Silent

  If a written loan agreement does not state an interest rate, Arizona sets the rate at 10 percent per year (Arizona Revised Statutes Section 44-1201). Always write the agreed rate into the agreement so this default does not apply by accident. Because a written rate can be any amount the parties agree to, stating the number is the single most important interest step.

• Lender Licensing (Consumer Lender)

  A consumer lender license from the Department of Insurance and Financial Institutions is required only of a person engaged in the business of a consumer lender (Arizona Revised Statutes Section 6-603, with exemptions in Section 6-602). 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.

• Business Lenders Are Licensed and Regulated

  Even though private parties may agree to any written rate, a person who makes consumer loans as a business must be licensed as a consumer lender and follow consumer-protection rules (Arizona Revised Statutes Sections 6-602 and 6-603). Repeat, business-scale lending is treated differently from a one-off personal loan, so confirm your status before lending regularly for profit.

• Put the Loan in Writing

  A loan need not be written to be enforceable in Arizona, but writing it down is strongly advised and is what makes a higher agreed rate lawful. Any rate above the 10 percent fallback must be contracted for in writing (Arizona Revised Statutes Section 44-1201), and a written contract carries a six-year period to sue (Arizona Revised Statutes Section 12-548). Have both parties sign and date the agreement and keep a copy.

• Late Fees Must Be Reasonable

  Arizona 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 Arizona loan agreement as a reasonable amount tied to your real costs, and state it clearly in the written agreement so both sides know the terms.

• 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 written loan agreement executed in Arizona must generally be filed within six years, running from the default (Arizona Revised Statutes Section 12-548, covering debt founded on a written contract). Keeping a signed written agreement gives you a clear, provable claim. Confirm the current deadline before filing, since it can turn on when the last payment or written acknowledgment was made.