Indiana Loan Agreement
An Indiana loan agreement sets the loan terms and caps a consumer loan finance charge at 25 percent per year, with 8 percent applying if the rate is left blank.
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Introduction
A loan agreement in Indiana is a written contract to lend money and be repaid with interest, and on a consumer loan the finance charge generally cannot exceed 25 percent per year. In Indiana the interest a private lender may charge depends on the type of loan. For a consumer loan other than a supervised loan, the loan finance charge may not exceed 25 percent per year under Indiana Code Section 24-4.5-3-201; a supervised loan, above 25 percent up to 36 percent, may be made only by a licensed supervised lender. A non-consumer business loan has no statutory rate cap, so the parties may agree to any rate in writing. If the agreement does not state a rate, Indiana applies the legal rate of 8 percent per year (Section 24-4.6-1-102). Making an occasional private loan does not by itself require a license: the Uniform Consumer Credit Code licenses a person who regularly engages in the business of making consumer loans (Section 24-4.5-3-502), which an individual making a one-off loan is not. Once the rate is set, a sound Indiana loan agreement names the parties, the principal, the interest rate as a number, the repayment schedule, any late fee, and what counts as default. It should include an acceleration clause, which lets the lender demand the entire unpaid balance at once if the borrower misses payments. Put the terms in writing: a lawsuit on a written contract or promissory note can be filed for six years, and a clear signed agreement protects both sides if the loan is later disputed. DocDraft builds your Indiana loan agreement from your facts, with attorney review available before you sign.
Key Things to Know
- 1
In Indiana, a loan agreement records the amount lent, the interest rate, and the repayment schedule, and the loan finance charge on an ordinary consumer loan is capped at 25 percent per year.
- 2
Indiana caps the finance charge on a consumer loan. For a consumer loan other than a supervised loan, the loan finance charge may not exceed 25 percent per year on the unpaid principal balances (Indiana Code Section 24-4.5-3-201). A non-consumer business loan has no statutory rate cap, so the parties may agree to any rate in writing.
- 3
If a loan agreement does not state an interest rate, Indiana applies the legal rate of 8 percent per year (Indiana Code Section 24-4.6-1-102). To charge a different agreed rate, state it in the written contract, within the applicable consumer cap.
- 4
You do not need a license to make an occasional private loan. The Uniform Consumer Credit Code licenses a person who regularly engages in the business of making consumer loans (Section 24-4.5-3-502). An individual making a single, occasional loan is not regularly engaged and generally does not need a license.
- 5
Charging above 25 percent on a consumer loan requires a license. A supervised loan, above 25 percent up to 36 percent, may be made only by a supervised lender licensed under the Uniform Consumer Credit Code. Keep a private consumer loan at or below 25 percent per year unless you are a licensed supervised lender.
- 6
Put the loan in writing and keep it. A lawsuit on a written contract or promissory note must be filed within six years in Indiana (Indiana Code Section 34-11-2-9). A written, signed agreement is far easier to enforce than an oral one and fixes the agreed rate.
- 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.
Key decisions before you file
Before you file a Loan Agreement in Indiana, a few decisions shape the document: which option to choose and what each one means. The Loan Agreement guide walks through them.
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Indiana Requirements for Loan Agreement
Maximum Interest Rate (Usury Cap)
Indiana caps the finance charge on a consumer loan. For a consumer loan other than a supervised loan, the loan finance charge may not exceed 25 percent per year on the unpaid principal balances (Indiana Code Section 24-4.5-3-201). A non-consumer business loan has no statutory rate cap, so the parties may agree to any rate in writing. State the rate as a number and keep a private consumer loan at or below 25 percent per year unless you are a licensed supervised lender.
Legal Rate When the Contract Is Silent
If a loan agreement does not state an interest rate, Indiana applies the legal rate of 8 percent per year (Indiana Code Section 24-4.6-1-102). The money-judgment rate is also 8 percent. To charge a different agreed rate, write it into the agreement, within the 25 percent consumer cap where the loan is a consumer loan, so the 8 percent default does not apply by accident.
Lender Licensing (Uniform Consumer Credit Code)
The Uniform Consumer Credit Code licenses a person who regularly engages in the business of making consumer loans (Indiana Code Section 24-4.5-3-502). An individual making an occasional private loan is not regularly engaged in the 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.
Supervised Loans Above 25 Percent
Charging more than 25 percent per year on a consumer loan makes it a supervised loan, which may be made only by a supervised lender licensed under the Uniform Consumer Credit Code, up to a 36 percent ceiling. Keep a private consumer loan at or below 25 percent per year (Indiana Code Section 24-4.5-3-201) unless you hold a supervised-lender license.
Late Fees Within the Interest Limit
For a private loan Indiana has no separate general late-fee cap, and for a consumer loan the Uniform Consumer Credit Code governs delinquency charges. Keep any late fee reasonable and, together with interest, within the 25 percent consumer cap for a consumer loan (Indiana Code Section 24-4.5-3-201). Set any late fee as a reasonable estimate of the lender actual costs rather than an arbitrary penalty.
Put the Loan in Writing
A loan need not be written to be enforceable in Indiana, but writing it down is strongly advised. A written contract fixes the agreed interest rate so the 8 percent default does not apply (Indiana Code Section 24-4.6-1-102), and it carries a six-year period to sue (Section 34-11-2-9). 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 or promissory note must generally be filed within six years in Indiana, running from when the cause of action accrues (Indiana Code Section 34-11-2-9). Keeping a signed written agreement gives you this period and fixes the terms if you have to collect the debt.