Georgia Loan Agreement

Introduction

Key Things to Know

1. 1

   In Georgia a loan agreement records the lender's money and the borrower's promise to repay it, with the amount, the rate, and the due dates set in writing; a loan of more than 3,000 dollars may carry any written rate, while smaller loans stay under the 16 percent ceiling and an unstated rate defaults to 7 percent.

2. 2

   Georgia sets interest limits by loan size. Under the Official Code of Georgia Annotated Section 7-4-2, a loan of 3,000 dollars or less generally may not exceed 16 percent per year in simple interest, while for a loan of more than 3,000 dollars the parties may agree to any rate in a written contract. Confirm the current rate against the Code before you lend.

3. 3

   If a written loan agreement does not state an interest rate, Georgia applies a legal rate of 7 percent per year simple interest (Section 7-4-2(a)(1)(A)). To charge a specific higher rate, state the agreed rate in a written contract signed by the borrower.

4. 4

   You generally do not need a license to make an occasional private loan. The Georgia Industrial Loan Act licenses persons engaged in the business of making loans of 3,000 dollars or less (Section 7-3-4). An individual making a single, occasional loan is not in that business. Banks and licensed lenders are regulated separately.

5. 5

   There is a criminal-usury ceiling. Reserving, charging, or taking interest greater than 5 percent per month is a misdemeanor under Section 7-4-18, so even on a larger loan where the parties may agree to any rate, the rate should stay below that line.

6. 6

   Put the loan in writing and keep it. A lawsuit on a written contract must generally be filed within six years in Georgia (Section 9-3-24). A written, signed agreement is far easier to enforce than an oral one and fixes the agreed rate.

7. 7

   Spell out default, acceleration, and any late fee. Define what counts as default, include an acceleration clause so the lender can demand the entire unpaid balance at once, and keep any late fee reasonable and within the applicable interest limit for the loan.

Georgia Requirements for Loan Agreement

• Maximum Interest Rate (Usury Cap)

  Georgia sets interest limits by loan size. Under the Official Code of Georgia Annotated Section 7-4-2, a loan of 3,000 dollars or less generally may not exceed 16 percent per year in simple interest, while for a loan of more than 3,000 dollars the parties may agree to any rate in a written contract. State the rate as a number and confirm the current limit against the Code or with an attorney before you lend.

• Legal Rate When the Contract Is Silent

  If a written loan agreement does not state an interest rate, Georgia applies a legal rate of 7 percent per year simple interest (Official Code of Georgia Annotated Section 7-4-2(a)(1)(A)). To charge a specific higher rate, state the agreed rate in a written contract signed by the borrower, subject to the usury limit for the loan size.

• Lender Licensing (Industrial Loan Act)

  The Georgia Industrial Loan Act, administered by the Department of Banking and Finance, licenses persons engaged in the business of making loans of 3,000 dollars or less (Official Code of Georgia Annotated Section 7-3-4). An individual making an occasional private loan is not in that business and generally does not need a license. If you lend money repeatedly as a business, confirm whether you must be licensed before you lend.

• Criminal Usury Ceiling

  Even on a larger loan where the parties may agree to any rate, Georgia sets an outer criminal-usury line. Reserving, charging, or taking interest greater than 5 percent per month is a misdemeanor under Official Code of Georgia Annotated Section 7-4-18. Keep any agreed rate well below that line, and confirm the current provision against the Code before you lend.

• Late Fees Within the Interest Limit

  Georgia has no single general statutory late-fee cap for an ordinary private loan, so any late charge should be reasonable and, together with interest, stay within the limit that applies to the loan size under Section 7-4-2. Set any late fee as a reasonable estimate of the lender actual costs from a late payment rather than an arbitrary penalty.

• Put the Loan in Writing

  A loan need not be written to be enforceable in Georgia, but writing it down is strongly advised. Georgia looks to a written contract to fix an agreed interest rate, and a written contract carries a six-year period to sue under Official Code of Georgia Annotated Section 9-3-24. Have both parties sign and date the agreement and keep a copy.

• 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 must generally be filed within six years in Georgia, running from when the debt becomes due and payable (Official Code of Georgia Annotated Section 9-3-24). Keeping a signed written agreement gives you this period and fixes the terms if you have to collect the debt.