What is a loan agreement in Minnesota?

A loan agreement is a written contract in which a lender lends money to a borrower who promises to repay it, usually with interest, on an agreed schedule. In Minnesota it should name the parties, the principal, the interest rate as a number, the repayment dates, any late fee, and what counts as default. Because Minnesota caps interest on a private written loan at 8 percent per year (Minnesota Statutes Section 334.01) and fills a blank rate at 6 percent, stating the rate in writing matters. A written contract can also be enforced for six years.

What is the maximum legal interest rate in Minnesota?

For a private written loan the maximum is 8 percent per year under Minnesota Statutes Section 334.01, which bars taking more than 8 dollars on 100 dollars for one year on the loan or forbearance of money. This cap applies to private lenders. Banks, credit unions, and lenders that charge interest under a licensing statute are treated differently, and the cap lifts entirely for a written loan of 100,000 dollars or more signed by the borrower.

Is a written loan agreement required in Minnesota?

A loan does not have to be in writing to be enforceable in Minnesota, but writing it down is strongly advised. To charge interest above the 6 percent legal rate, up to the 8 percent cap, Minnesota requires a written agreement that states the rate (Minnesota Statutes Section 334.01). A written contract also carries a six-year period to sue (Minnesota Statutes Section 541.05), so a signed agreement protects both sides.

Do I need a license to lend money in Minnesota?

Not for a one-off private loan. A Regulated Loan Act license, issued by the Minnesota Department of Commerce, is required only of a person who is engaged in the business of making loans (Minnesota Statutes Section 56.01). An individual who makes an occasional personal loan is not in the business of lending and generally does not need a license. If you lend repeatedly as a business, you likely need to be licensed.

What is the penalty for usury in Minnesota?

Charging more than the lawful maximum makes the loan usurious. In Minnesota a usurious contract is void except as to a holder in due course (Minnesota Statutes Section 334.03), so the lender can lose the right to collect. On a written business or agricultural loan that exceeds the higher rate allowed by Section 334.011, the entire interest is forfeited. The safest course is to keep a private personal loan at or below 8 percent per year unless you are an exempt or licensed lender.

What interest applies if my loan agreement is silent in Minnesota?

If a written loan agreement does not state an interest rate, Minnesota sets the legal rate at 6 percent per year under Minnesota Statutes Section 334.01. To charge a higher rate, up to the 8 percent cap on a private loan, you must state the rate in a written agreement signed by the borrower. Always write the agreed rate into the agreement so the 6 percent default does not apply by accident.

Can I charge a late fee on a loan in Minnesota?

Minnesota does not set a general statutory late-fee cap for a plain private written loan, so a late fee is enforced as a matter of contract. Keep any late fee reasonable and tied to your real costs from a late payment rather than an arbitrary penalty, and state it clearly in the agreement. Note that Minnesota law does not let you raise the interest rate at maturity, so rely on a stated, modest late charge instead.

How long do I have to sue on an unpaid loan in Minnesota?

For a written loan agreement, you generally have six years to sue in Minnesota, the period Minnesota Statutes Section 541.05 applies to a contract obligation. The clock usually runs from the default or the last payment. Because the period is the same for written and oral contracts in Minnesota, a signed written agreement matters most for proving the terms and the rate if you have to collect.

Minnesota Loan Agreement

A Minnesota loan agreement sets the loan terms and caps private-loan interest at 8 percent per year, with 6 percent applying if the rate is left blank.

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Introduction

A loan agreement in Minnesota is a written contract laying out what is borrowed, how it is repaid, and the interest owed, and on a private written loan that interest may not run past 8 percent per year. In Minnesota the interest you can charge is capped. Under Minnesota Statutes Section 334.01, a private written loan may not charge more than 8 percent per year, and if the agreement does not state a rate the law fills the gap at 6 percent per year. That 8 percent cap binds private individuals, but it does not bind banks, credit unions, or lenders that charge interest under a licensing statute, and it lifts entirely for a written loan of 100,000 dollars or more signed by the borrower. Making an occasional private loan does not by itself require a license: a Regulated Loan Act license from the Minnesota Department of Commerce is needed only of a person engaged in the business of making loans (Minnesota Statutes Section 56.01), not of someone who makes a one-off personal loan. Once the rate is set, a sound Minnesota 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 written contract can be enforced for six years, and a clear signed agreement is what protects both sides if the loan is later disputed. DocDraft builds your Minnesota loan agreement from your facts, with attorney review available before you sign.

Key Things to Know

1
This document is the written proof of a loan, listing the principal, the payment dates, and the interest rate, and Minnesota holds that rate on a private written loan to a maximum of 8 percent per year.
2
Minnesota caps interest on a private written loan at 8 percent per year. Under Minnesota Statutes Section 334.01, no lender may take more than 8 dollars on 100 dollars for one year on the loan or forbearance of money. The cap binds private lenders; banks, credit unions, and lenders acting under a licensing statute are treated differently.
3
If a written loan agreement does not state an interest rate, Minnesota law sets the legal rate at 6 percent per year (Minnesota Statutes Section 334.01). To charge more than 6 percent, up to the 8 percent cap, you need a written agreement that states the rate.
4
You do not need a license to make an occasional private loan. A Regulated Loan Act license from the Minnesota Department of Commerce is required only of a person engaged in the business of making loans (Minnesota Statutes Section 56.01). An individual who makes a one-off personal loan is not in the business of lending.
5
The 8 percent cap lifts for large and business loans. A written loan of 100,000 dollars or more signed by the borrower has no rate limit (Minnesota Statutes Section 334.01 subdivision 2), and a written business or agricultural loan under 100,000 dollars may run up to 4.5 percent over the 90-day commercial paper discount rate (Section 334.011).
6
Put the loan in writing. Writing is required to charge above the 6 percent legal rate, and a usurious contract is void except as to a holder in due course (Minnesota Statutes Section 334.03). A signed written agreement protects the rate you bargained for.
7
Spell out default and acceleration, and keep the signed agreement. 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 full unpaid balance at once. A lawsuit on a written contract must generally be filed within six years (Minnesota Statutes Section 541.05).

Key decisions before you file

Before you file a Loan Agreement in Minnesota, 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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MINNESOTA LOAN AGREEMENT (Written loan of money with interest and repayment terms; Minnesota law)

PARTIES. This Loan Agreement is made on [DATE] between [LENDER NAME], of [ADDRESS] (Lender), and [BORROWER NAME], of [ADDRESS] (Borrower).
LOAN AMOUNT (PRINCIPAL). Lender agrees to lend, and Borrower agrees to repay, the principal sum of [AMOUNT IN WORDS] dollars ([AMOUNT]).
INTEREST. The unpaid principal bears interest at [NUMBER] percent per year. On a private written loan, Minnesota caps the rate at 8 percent per year under Minnesota Statutes Section 334.01, unless the Lender is an exempt or licensed lender or the loan is 100,000 dollars or more. If this agreement is left blank as to rate, Minnesota law sets the legal rate at 6 percent per year.
REPAYMENT. Borrower shall repay the loan by [ ] a single payment of [AMOUNT] due on [DATE]; or [ ] [NUMBER] equal installments of [AMOUNT] each, due on the [DAY] of each month starting [DATE] until paid in full. Payments apply first to accrued interest, then to principal.
PREPAYMENT. Borrower may prepay all or part of the principal at any time without penalty, and interest stops accruing on any amount prepaid.
LATE FEE. If a payment is more than [NUMBER] days late, Borrower shall pay a late charge of [AMOUNT], which the parties agree is a reasonable estimate of Lender costs from the late payment. Minnesota does not set a statutory late-fee cap for a private loan, so keep the charge reasonable.
DEFAULT. Borrower is in default if a payment is more than [NUMBER] days late, if Borrower breaks any promise in this agreement, or if Borrower becomes insolvent or files for bankruptcy.
ACCELERATION. On default, Lender may declare the entire unpaid balance of principal and accrued interest immediately due and payable, after any notice and cure period stated here: [NOTICE TERMS].
COLLECTION COSTS. If the loan is placed for collection, Borrower shall pay Lender reasonable collection costs and attorney fees to the extent permitted by law.
SECURITY. This loan is [ ] unsecured; or [ ] secured by the following collateral: [DESCRIBE]. Any collateral is governed by a separate security agreement.
GOVERNING LAW. This agreement is governed by the laws of the State of Minnesota.
ENTIRE AGREEMENT. This writing is the entire agreement between the parties and may be changed only in a writing signed by both.

Executed on [DATE].

[LENDER NAME], Lender

[BORROWER NAME], Borrower

Note: This is a plain Minnesota loan-agreement skeleton for a private written loan. An individual making an occasional loan is generally not required to hold a license; a person engaged in the business of lending needs a Regulated Loan Act license from the Department of Commerce (Minnesota Statutes Section 56.01). Keep the rate at or below 8 percent per year on a private loan unless you are exempt or licensed (Minnesota Statutes Section 334.01), and keep the signed agreement, because a lawsuit on a written contract must be filed within six years (Minnesota Statutes Section 541.05). For the complete builder and other states, see the full Loan Agreement template hub.

Minnesota Requirements for Loan Agreement

Maximum Interest Rate (Usury Cap)
Minnesota caps interest on a private written loan at 8 percent per year. Under Minnesota Statutes Section 334.01, no person may take or receive more than 8 dollars on 100 dollars for one year on the loan or forbearance of money. State the rate as a number and keep a private loan at or below 8 percent unless you are an exempt lender, a licensed lender, or the loan is 100,000 dollars or more.
Legal Rate When the Contract Is Silent
If a written loan agreement does not state an interest rate, Minnesota law fixes the legal rate at 6 percent per year (Minnesota Statutes Section 334.01). To charge more than 6 percent, up to the 8 percent cap on a private loan, the parties must contract in writing for the higher rate. Always write the agreed rate into the agreement so the 6 percent default does not apply by accident.
Lender Licensing (Regulated Loan Act)
A Regulated Loan Act license from the Minnesota Department of Commerce is required only of a person engaged in the business of making loans (Minnesota Statutes Section 56.01). 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.
Large and Business Loans Are Not Capped
The 8 percent cap does not apply to every loan. A written loan of 100,000 dollars or more signed by the borrower has no rate limit (Minnesota Statutes Section 334.01 subdivision 2), and a written business or agricultural loan under 100,000 dollars may charge up to 4.5 percent over the 90-day commercial paper discount rate (Minnesota Statutes Section 334.011). Banks, credit unions, and lenders acting under a licensing statute are also outside the private-loan cap.
Usurious Contracts Are Void
A contract that reserves more interest than Minnesota allows is void except as to a holder in due course (Minnesota Statutes Section 334.03), so a usurious lender can lose the right to collect. On a written business or agricultural loan that exceeds the rate allowed by Section 334.011, the entire interest due is forfeited. This is why keeping a private loan at or below 8 percent per year matters.
Put the Loan in Writing
A loan need not be written to be enforceable in Minnesota, but writing it down is strongly advised. A written agreement is required to charge interest above the 6 percent legal rate (Minnesota Statutes Section 334.01), and it fixes the rate, the schedule, and the remedies so they are not left to memory. 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 Minnesota, the period Minnesota Statutes Section 541.05 applies to a contract obligation, usually running from the default or the last payment. Minnesota uses the same six-year period for written and oral contracts, so keeping a signed written agreement matters most for proving the terms and the rate if you have to collect.

Find out where you stand in Minnesota

Introduction

Key Things to Know

Key decisions before you file

Customize your Loan Agreement Template with DocDraft

Minnesota Requirements for Loan Agreement

Maximum Interest Rate (Usury Cap)

Legal Rate When the Contract Is Silent

Lender Licensing (Regulated Loan Act)

Large and Business Loans Are Not Capped

Usurious Contracts Are Void

Put the Loan in Writing

Default and Acceleration

Time Limit to Sue on the Debt

Frequently Asked Questions