Idaho Loan Agreement

Introduction

Key Things to Know

1. 1

   An Idaho loan agreement is the signed record of the amount borrowed, the interest rate, and the repayment dates, and since Idaho sets no general ceiling on interest the written rate the parties agree to is the rate that controls.

2. 2

   Idaho has no general usury cap on a private written loan. The rate the parties agree to in writing controls, because the Idaho Code imposes no stated ceiling on the agreed rate for an ordinary loan (Idaho Code Section 28-22-104). State the rate clearly, since the written rate is what binds the borrower.

3. 3

   If a loan agreement does not fix a rate in writing, Idaho sets the legal rate at 12 percent per year (Idaho Code Section 28-22-104). The post-judgment rate is 5 percent plus a base rate the State Treasurer sets each July. To charge a different rate, write the agreed rate into the contract.

4. 4

   You do not need a license to make an occasional private loan. The Idaho Credit Code licenses a person who engages in the business of making regulated consumer loans (Section 28-46-301), and a regulated loan exists only where the creditor is regularly engaged in the business of making loans (Section 28-41-301). A one-off loan is not that business.

5. 5

   Banks and licensed lenders are separately exempt from Credit Code licensing. Supervised financial organizations such as banks and credit unions, licensed Idaho mortgage lenders as to mortgage lending, and government agencies are exempt (Section 28-46-301). Their rules differ from those for a private lender.

6. 6

   Put the loan in writing and keep it. A lawsuit on a written contract must be filed within five years in Idaho (Idaho Code Section 5-216). Because there is no rate cap, the written agreement is what proves the rate and terms, so a signed contract protects both sides.

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 set any late fee as a reasonable charge; Idaho's Credit Code delinquency limits apply to regulated consumer loans, not to an ordinary private loan.

Idaho Requirements for Loan Agreement

• Maximum Interest Rate (No General Usury Cap)

  Idaho does not set a general usury cap on a private written loan. The rate the parties agree to in writing controls, because the Idaho Code imposes no stated ceiling on the agreed rate for an ordinary loan (Idaho Code Section 28-22-104). State the rate as a number and clearly, since the written rate is what binds the borrower.

• Legal Rate When the Contract Is Silent

  If a loan agreement does not fix an interest rate in writing, Idaho applies the legal rate of 12 percent per year (Idaho Code Section 28-22-104). The same section sets a post-judgment rate of 5 percent plus a base rate the State Treasurer publishes each July. Always write your agreed rate into the agreement so the 12 percent default does not apply by accident.

• Lender Licensing (Idaho Credit Code)

  The Idaho Credit Code licenses a person who engages in the business of making regulated consumer loans (Idaho Code Section 28-46-301), and a regulated loan exists only where the creditor is regularly engaged in the business of making loans (Section 28-41-301). An individual making an occasional private loan is not regularly engaged in the business and generally does not need a license. If you lend repeatedly as a business, confirm whether you must be licensed.

• Exempt Lenders

  Several classes are exempt from Idaho Credit Code licensing: supervised financial organizations such as banks and credit unions and out-of-state chartered depository lenders, mortgage lenders licensed under the Idaho Residential Mortgage Practices Act as to mortgage lending, and agencies of the United States and of the state and its subdivisions (Idaho Code Section 28-46-301). Their rate and licensing rules differ from those for a private lender.

• Late Fees on a Private Loan

  Idaho does not set a general late-fee cap for an ordinary private loan, and the Credit Code delinquency limits apply only to regulated consumer loans made in the business of lending, not to a one-off private loan. Set any late fee in the agreement as a reasonable charge tied to 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 Idaho, but writing it down is strongly advised. Because there is no rate cap, the written contract is what fixes and proves the agreed interest rate; without a writing, the 12 percent legal rate applies (Idaho Code Section 28-22-104). A written contract also carries a five-year period to sue (Section 5-216). 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 five years in Idaho, running from the default (Idaho Code Section 5-216). Keeping a signed written agreement gives you this period and, because Idaho has no rate cap, is what proves the agreed rate and terms if you have to collect the debt.