DocDraft Logo

Ohio Loan Agreement

An Ohio loan agreement sets the loan terms and caps interest on most private loans at 8 percent per year under Revised Code Section 1343.01.

Find out where you stand in Ohio

What kind of loan are you putting in writing?

DocDraft provides document preparation, not legal advice.

Introduction

Ohio treats a loan agreement as a written contract in which a lender lends money to be repaid with interest, and for most private loans that interest may not exceed 8 percent per year. In Ohio the interest you can charge is capped low for most private loans. Under Ohio Revised Code Section 1343.01, the parties to a written note may stipulate for interest at any rate not exceeding 8 percent per year, except that on a loan with original principal over 100,000 dollars the parties may agree to a higher rate. If a written contract does not state a rate, the legal rate is set annually by the Ohio Tax Commissioner (the federal short-term rate rounded, plus 3 percent) under Sections 1343.03 and 5703.47. Making an occasional private loan does not by itself require a license: Ohio requires a license only of a person engaged in the business of lending money in amounts of 5,000 dollars or less (Section 1321.02), so a one-off private loan is not licensed. Once the rate is set, a sound Ohio 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 2305.06), and a clear signed agreement is what protects both sides if the loan is later disputed. DocDraft builds your Ohio loan agreement from your facts, with attorney review available before you sign.

Key Things to Know

  1. 1

    A loan agreement is really just the written record of an Ohio loan, listing the principal, the payment dates, and a rate that on an ordinary private loan is capped at 8 percent per year.

  2. 2

    Ohio caps interest low for most private loans. Under Revised Code Section 1343.01, the parties may stipulate for interest at any rate not exceeding 8 percent per year, except that on a loan with original principal over 100,000 dollars a higher rate may be agreed. Banks and licensed lenders operate under their own separate rate authority.

  3. 3

    If a written loan agreement does not state a rate, Ohio applies a legal rate set annually by the Ohio Tax Commissioner: the federal short-term rate rounded to a whole number, plus 3 percent (Sections 1343.03 and 5703.47). Check the current-year rate before relying on it, and state your agreed rate in writing to control the number.

  4. 4

    You do not need a license to make an occasional private loan. Ohio requires a license only of a person engaged in the business of lending money in amounts of 5,000 dollars or less (Section 1321.02); larger consumer installment loans require registration under Chapter 1321. An individual making an occasional personal loan is not in the business of lending.

  5. 5

    Loans over 100,000 dollars are not held to the 8 percent cap. When the original principal exceeds 100,000 dollars, Ohio lets the parties agree to a rate above 8 percent (Section 1343.01). For a smaller private loan, keep the stated rate at or below 8 percent unless you are an exempt or licensed lender.

  6. 6

    Put the loan in writing and keep it. A lawsuit on a written contract must generally be filed within six years in Ohio (Section 2305.06). A written, signed agreement is required to fix a stipulated 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 Ohio, 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

Customize your Loan Agreement Template with DocDraft

OHIO LOAN AGREEMENT (Written loan of money with interest and repayment terms; Ohio law)

  1. PARTIES. This Loan Agreement is made on [DATE] between [LENDER NAME], of [ADDRESS] (Lender), and [BORROWER NAME], of [ADDRESS] (Borrower).

  2. LOAN AMOUNT (PRINCIPAL). Lender agrees to lend, and Borrower agrees to repay, the principal sum of [AMOUNT IN WORDS] dollars ([AMOUNT]).

  3. INTEREST. The unpaid principal bears interest at [NUMBER] percent per year. In Ohio the parties may stipulate for interest at any rate not exceeding 8 percent per year (Revised Code Section 1343.01), unless the original principal exceeds 100,000 dollars or the Lender is an exempt or licensed lender. If this agreement is left blank as to rate, a legal rate set annually by the Ohio Tax Commissioner applies (Sections 1343.03 and 5703.47).

  4. 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.

  5. PREPAYMENT. Borrower may prepay all or part of the principal at any time without penalty, and interest stops accruing on any amount prepaid.

  6. 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 and not a penalty.

  7. 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.

  8. 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].

  9. 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.

  10. SECURITY. This loan is [ ] unsecured; or [ ] secured by the following collateral: [DESCRIBE]. Any collateral is governed by a separate security agreement.

  11. GOVERNING LAW. This agreement is governed by the laws of the State of Ohio.

  12. 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 Ohio 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 5,000 dollars or less needs a license from the Division of Financial Institutions (Revised Code Section 1321.02). Keep the stated rate at or below 8 percent per year on a loan of 100,000 dollars or less unless you are exempt or licensed (Section 1343.01), and keep the signed agreement, because a lawsuit on a written contract must be filed within six years (Section 2305.06). For the complete builder and other states, see the full Loan Agreement template hub.

Ohio Requirements for Loan Agreement

Maximum Interest Rate (Usury Cap)

Ohio caps interest low for most private loans. Under Revised Code Section 1343.01, the parties to a written note may stipulate for interest at any rate not exceeding 8 percent per year, except that on a loan with original principal over 100,000 dollars a higher rate may be agreed. State the rate as a number and keep a smaller private loan at or below 8 percent unless you are an exempt or licensed lender.

Legal Rate When the Contract Is Silent

If a written loan agreement does not state an interest rate, Ohio applies a legal rate set annually by the Ohio Tax Commissioner: the federal short-term rate rounded to a whole number, plus 3 percent (Revised Code Sections 1343.03 and 5703.47). Because the number changes each year, check the current-year rate, and write your agreed rate into the agreement so the default rate does not apply by accident.

Loans Over 100,000 Dollars

The 8 percent contract ceiling does not bind a loan whose original principal exceeds 100,000 dollars. On such a loan Ohio lets the parties agree to a higher rate (Revised Code Section 1343.01). For any loan of 100,000 dollars or less, keep the stated rate at or below 8 percent unless you are an exempt or licensed lender. Confirm the principal amount before setting the rate.

Lender Licensing (Small Loan Act)

An Ohio license from the Division of Financial Institutions is required only of a person engaged in the business of lending money in amounts of 5,000 dollars or less (Revised Code Section 1321.02); larger consumer installment loans require registration under Chapter 1321. 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 or registered.

Usury Penalty

Charging more than the applicable Ohio ceiling makes the excess interest unlawful, and a lender who exceeds the 8 percent cap generally cannot enforce interest above the lawful rate. Keep a private loan of 100,000 dollars or less at or below 8 percent per year (Revised Code Section 1343.01) unless you are exempt or licensed, and state the agreed rate in the written agreement so you can show the loan was within the lawful limit.

Late Fees Must Be Reasonable

Ohio does not set a flat statutory late-fee cap on a private written loan, though specific caps apply to regulated consumer loans and residential mortgages. 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 Ohio 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 Ohio, running from the default or from the last payment or written acknowledgment of the debt (Revised Code Section 2305.06, as amended effective June 16, 2021). Keeping a signed, dated written agreement gives the clearer, easier-to-prove position if you have to collect.

Frequently Asked Questions

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 Ohio 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 Ohio caps interest on most private loans at 8 percent per year (Revised Code Section 1343.01), stating the rate in writing matters. A written contract can also be enforced for six years.

A loan does not have to be in writing to be enforceable in Ohio, but writing it down is strongly advised. A written contract is required to fix a stipulated interest rate up to 8 percent (or a higher rate on principal over 100,000 dollars) under Section 1343.01, and a written contract carries a six-year period to sue under Section 2305.06. A signed, dated agreement protects both sides if the loan is later disputed.

Not for a one-off private loan. Ohio requires a license, from the Division of Financial Institutions, only of a person engaged in the business of lending money in amounts of 5,000 dollars or less (Revised Code Section 1321.02); larger consumer installment loans require registration under Chapter 1321. 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 must be licensed.

Charging more than the applicable ceiling makes the excess interest unlawful, and an Ohio lender who exceeds the 8 percent cap generally cannot enforce interest above the lawful rate. The safest course is to keep a private loan of 100,000 dollars or less at or below 8 percent per year (Revised Code Section 1343.01) unless you are an exempt or licensed lender, and to state the agreed rate in the written agreement so you can show the loan was within the lawful Ohio limit.

If a written loan agreement does not state a rate, Ohio applies a legal rate set annually by the Ohio Tax Commissioner: the federal short-term rate rounded to a whole number, plus 3 percent (Revised Code Sections 1343.03 and 5703.47). Because the number changes each year, check the current-year rate, and state your agreed rate in the written agreement to control what applies.

Yes, if the fee is reasonable. Ohio does not set a flat statutory late-fee cap on a private written loan, though specific caps apply to regulated consumer loans and mortgages. Tie any late fee in an Ohio loan agreement to the real cost of a late payment rather than an arbitrary penalty, and state the grace period and the fee clearly in the contract.

For a written loan agreement you generally have six years from the default (or from the last payment or written acknowledgment of the debt) to sue in Ohio (Revised Code Section 2305.06, as amended effective June 16, 2021). Because the period runs from breach and a signed writing is easy to prove, keeping a written, dated Ohio loan agreement gives you the stronger position if you have to collect.