Kansas Loan Agreement

Introduction

Key Things to Know

1. 1

   In Kansas, a loan agreement records who lends, who repays, the rate, and the payment dates, and a written private loan may carry interest up to 15 percent per year unless another rate is authorized by law.

2. 2

   Kansas caps interest on a written private loan. Under Kansas Statutes Annotated Section 16-207, the parties may stipulate for interest at a rate not to exceed 15 percent per year unless another rate is specifically authorized by law. The cap does not reach consumer credit under the Uniform Consumer Credit Code, mortgage-business loans, or business and agricultural transactions.

3. 3

   If a written loan agreement does not state an interest rate, Kansas sets the default rate at 10 percent per year (Section 16-201). To charge more than 10 percent, up to the 15 percent cap, you need a written agreement that states the rate.

4. 4

   You do not need a license to make an occasional private loan. A supervised-loan license under the Uniform Consumer Credit Code is required only of a person regularly engaged in the business of making loans, which Kansas measures as extending credit more than 25 times a year (Section 16a-2-301), regulated by the Office of the State Bank Commissioner.

5. 5

   Kansas sets no separate flat late-fee cap for a written private loan. Because the contract rate is limited to 15 percent per year, any late charge or default interest together with the note interest cannot push the effective rate above 15 percent (Section 16-207). Keep any late fee tied to your real costs.

6. 6

   Put the loan in writing and keep it. A lawsuit on a written contract must be filed within five years (Section 60-511). A written agreement is also what lets you charge a stated rate above the 10 percent default and is far easier to enforce.

7. 7

   Spell out default and acceleration. Define what counts as default, usually a missed payment past a stated grace period, and include an acceleration clause so the lender can demand the entire unpaid balance at once if the borrower defaults.

Kansas Requirements for Loan Agreement

• Maximum Interest Rate (Usury Cap)

  Kansas caps interest on a written private loan. Under Kansas Statutes Annotated Section 16-207, the parties may stipulate for interest at a rate not to exceed 15 percent per year unless another rate is specifically authorized by law. State the rate as a number and keep a private loan at or below 15 percent unless the loan falls within an exempt class such as licensed consumer credit or a business or agricultural transaction.

• Legal Rate When the Contract Is Silent

  If a written loan agreement does not state an interest rate, Kansas sets the default rate at 10 percent per year (Kansas Statutes Annotated Section 16-201). To charge more than 10 percent, up to the 15 percent cap, the parties must state the higher rate in a written instrument. Always write the agreed rate into the agreement so the 10 percent default does not apply by accident.

• Lender Licensing (Uniform Consumer Credit Code)

  A supervised-loan license under the Kansas Uniform Consumer Credit Code, issued by the Office of the State Bank Commissioner, is required only of a person regularly engaged in the business of making loans (Kansas Statutes Annotated Section 16a-2-301). Kansas measures regular engagement as extending credit more than 25 times a year, so an individual making an occasional private loan is not in the business of lending and generally does not need a license.

• Exempt Loans Are Not Bound by the 15 Percent Cap

  The 15 percent cap applies to ordinary written private loans, not to every transaction. Kansas excludes from Section 16-207 consumer credit transactions under the Uniform Consumer Credit Code, covered mortgage-business loans, qualified-plan loans, certain adjustable real-estate notes, and business and agricultural transactions (Kansas Statutes Annotated Section 16-207(e)). This is why a licensed consumer lender or a business loan can carry a rate above 15 percent while an ordinary private loan cannot.

• Late Fees Are Capped by the Usury Ceiling

  Kansas sets no separate flat statutory late-fee cap for a written private loan. Because the contract rate is limited to 15 percent per year, any late charge or default-interest component together with the note interest cannot push the effective rate above 15 percent (Kansas Statutes Annotated Section 16-207). Set any late fee as a reasonable estimate of the lender actual costs, not an arbitrary penalty.

• Put the Loan in Writing

  A loan need not be written to be enforceable in Kansas, but writing it down is strongly advised. A written instrument is what lets the parties stipulate a rate above the 10 percent default, up to the 15 percent cap (Kansas Statutes Annotated Section 16-207), and a written contract carries a five-year period to sue (Section 60-511). 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 Kansas, running from the default or missed payment (Kansas Statutes Annotated Section 60-511). Keeping a signed written agreement and a record of payments gives you a clear, provable claim within that period if you have to collect.