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New Mexico Loan Agreement

A New Mexico loan agreement sets the loan terms; absent a written rate the law applies 15 percent per year under NMSA Section 56-8-3.

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Introduction

A New Mexico loan agreement is a written contract in which a lender advances money to a borrower who promises to repay it with interest, and because New Mexico sets no general usury ceiling, the 15 percent yearly rate in NMSA 1978 Section 56-8-3 applies only when the parties leave the rate unwritten. New Mexico does not fix a single general usury ceiling for a written loan; instead, under NMSA 1978 Section 56-8-3, the rate is 15 percent per year only in the absence of a written contract fixing a different rate, and that same section lets the parties set a different rate by written agreement. So writing the rate down is what controls the number. A separate cap does apply to small loans: a licensed small loan of 10,000 dollars or less may not carry an annual percentage rate greater than 36 percent (Section 58-15-17). Making an occasional private loan does not by itself require a license: New Mexico requires a Small Loan Act license only of a person engaged in the business of lending 10,000 dollars or less (Section 58-15-3). Once the rate is set, a sound New Mexico 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 (Section 37-1-3), and a clear signed agreement is what protects both sides if the loan is later disputed. DocDraft builds your New Mexico loan agreement from your facts, with attorney review available before you sign.

Key Things to Know

  1. 1

    In plain terms, a loan agreement is the document that sets down how much a New Mexico borrower takes, when it must be repaid, and the interest charged; since Section 56-8-3 supplies its 15 percent rate only where no rate is written, the number that governs is the one the parties record.

  2. 2

    New Mexico does not fix a single general usury ceiling for a written loan. Under NMSA 1978 Section 56-8-3, the rate is 15 percent per year only in the absence of a written contract fixing a different rate; the same section lets the parties set a different rate by written agreement. Writing the rate down is what controls the number.

  3. 3

    If a loan is not put in a written contract fixing the rate, New Mexico applies 15 percent per year to money due by contract (Section 56-8-3). To charge a different rate, state it in a signed written agreement.

  4. 4

    Small loans are capped harder. A licensed small loan of 10,000 dollars or less may not carry an annual percentage rate greater than 36 percent under the New Mexico Small Loan Act (Section 58-15-17). Even for a private loan, keeping a small consumer loan at or below a reasonable rate is prudent.

  5. 5

    You do not need a license to make an occasional private loan. New Mexico requires a Small Loan Act license only of a person engaged in the business of lending 10,000 dollars or less (Section 58-15-3). An individual making an occasional personal loan is not in the business of lending, but a repeat lender should confirm licensing.

  6. 6

    Put the loan in writing and keep it. A lawsuit on a written contract must generally be filed within six years in New Mexico (Section 37-1-3). A written, signed agreement both fixes the rate and is far easier to enforce than an oral understanding.

  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.

Key decisions before you file

Before you file a Loan Agreement in New Mexico, a few decisions shape the document: which option to choose and what each one means. The Loan Agreement guide walks through them.

Open the Loan Agreement guide

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New Mexico Requirements for Loan Agreement

  • Maximum Interest Rate (No Fixed General Cap)

    New Mexico does not fix a single general usury ceiling for a written loan. Under NMSA 1978 Section 56-8-3, 15 percent per year applies only in the absence of a written contract fixing a different rate, and the same section lets the parties set a different rate by written agreement. State a reasonable rate as a number in the signed agreement, because the writing is what controls the rate.

  • Rate When the Contract Is Silent

    If a loan is not put in a written contract fixing the rate, New Mexico applies 15 percent per year to money due by contract (NMSA 1978 Section 56-8-3). To charge a different rate, the parties must state it in a signed written agreement. Always write the agreed rate into the agreement so the 15 percent default does not apply by accident.

  • Small Loan APR Cap (36 Percent)

    A licensed small loan of 10,000 dollars or less may not carry an annual percentage rate greater than 36 percent under the New Mexico Small Loan Act (NMSA 1978 Section 58-15-17). This ceiling binds licensed small-loan lenders; even on a private loan, keeping a small consumer loan at or below a reasonable rate well under 36 percent APR is the safe course.

  • Lender Licensing (Small Loan Act)

    A New Mexico Small Loan Act license, from the Financial Institutions Division of the Regulation and Licensing Department, is required only of a person engaged in the business of lending in amounts of 10,000 dollars or less (NMSA 1978 Section 58-15-3). An individual making an occasional private loan is not in the business of lending and generally does not need a license. If you lend repeatedly as a business, confirm whether you must be licensed.

  • Put the Loan in Writing

    A loan need not be written to be enforceable in New Mexico, but writing it down is strongly advised and is in effect how you set the rate. Section 56-8-3 applies the 15 percent default only when there is no written contract fixing a different rate, and a written contract carries a six-year period to sue (Section 37-1-3). Have both parties sign and date the agreement and keep a copy.

  • Late Fees Must Be Reasonable

    New Mexico does not set a flat statutory late-fee cap on a private written loan, though the Small Loan Act sets specific limits for licensed small loans. A late charge on a private loan should be a reasonable estimate of the lender actual costs from a late payment, not a penalty. State the grace period and the fee clearly in the New Mexico loan agreement.

  • 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 New Mexico, running from the default or from the last payment or written acknowledgment of the debt (NMSA 1978 Section 37-1-3). Keeping a signed, dated written agreement gives the longer, easier-to-prove period if you have to collect.

Frequently Asked Questions