South Carolina Loan Agreement

Introduction

Key Things to Know

1. 1

   A loan agreement, in plain terms, fixes a South Carolina loan's amount, repayment schedule, and interest rate; with no general usury cap in place, that rate is whatever the lender and borrower write down and agree to.

2. 2

   South Carolina does not set a general usury cap on a written loan. Title 34 Chapter 31 of the South Carolina Code fixes only the legal rate that applies when no rate is stated, not a maximum contract rate, so the parties to an ordinary written loan may agree on the interest rate. Consumer loans are regulated separately under the South Carolina Consumer Protection Code (Title 37).

3. 3

   If a written loan agreement does not state a rate, South Carolina law supplies the legal rate of eight and three-fourths percent (8.75 percent) per year (South Carolina Code Section 34-31-20(A)). A court judgment on the debt draws interest at the Wall Street Journal prime rate plus four percentage points (Section 34-31-20(B)).

4. 4

   You do not need a license to make an occasional private loan. A license from the State Board of Financial Institutions is required only to engage in the business of making supervised loans (South Carolina Code Section 37-3-502), and a consumer loan is one made by a person regularly engaged in the business of making loans (Section 37-3-104). A one-off personal loan is neither.

5. 5

   There is no flat statutory late-fee cap on a private South Carolina loan, so a late charge should be a reasonable estimate of the lender costs. For a regulated consumer loan, the Consumer Protection Code allows a delinquency charge on an installment more than ten days late, not exceeding five dollars or five percent of the unpaid installment (South Carolina Code Section 37-3-203).

6. 6

   Put the loan in writing and keep it. A loan does not have to be written to be enforceable in South Carolina, but a signed written agreement is far easier to prove and lets you set the interest rate, the schedule, and the default terms clearly. Both parties should sign and date it and keep a copy.

7. 7

   Spell out default and acceleration, and note the deadline to sue. 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. An action to collect the debt must be brought within three years (South Carolina Code Section 15-3-530).

South Carolina Requirements for Loan Agreement

• Maximum Interest Rate (No General Usury Cap)

  South Carolina does not set a general usury ceiling on an ordinary written loan. Title 34 Chapter 31 of the South Carolina Code fixes only the legal rate and the judgment rate, not a maximum contract rate, so the parties to a non-consumer written loan may agree on the interest rate. State the rate as a number in the agreement. Consumer credit is regulated separately under the South Carolina Consumer Protection Code (Title 37).

• Legal Rate When the Contract Is Silent

  If a written loan agreement does not state an interest rate, South Carolina law supplies the legal rate of eight and three-fourths percent (8.75 percent) per year (South Carolina Code Section 34-31-20(A)). Once a court enters judgment on the debt, the judgment draws interest at the Wall Street Journal prime rate plus four percentage points, compounded annually (Section 34-31-20(B)). Write the agreed rate into the agreement so the silent rate does not apply by accident.

• Lender Licensing (Supervised Loans)

  A license from the South Carolina State Board of Financial Institutions is required only to engage in the business of making supervised loans (South Carolina Code Section 37-3-502). A consumer loan is one made by a person regularly engaged in the business of making loans (Section 37-3-104), and a supervised loan is a consumer loan whose finance charge exceeds 12 percent per year (Section 37-3-501). An individual making an occasional private loan is not in the business of lending and generally does not need a license.

• Consumer Loans Are Regulated Separately

  While an ordinary written loan is not rate-capped, a consumer loan is. Under the South Carolina Consumer Protection Code a lender who is not a supervised lender may contract for a finance charge up to 12 percent per year (South Carolina Code Section 37-3-201); a consumer loan above that rate is a supervised loan that requires a license and a maximum-rate schedule filed with the Department of Consumer Affairs (Sections 37-3-501 and 37-3-305). This is why a licensed consumer lender can lawfully charge more than a private lender expects.

• Late Fees Should Be Reasonable

  There is no flat statutory late-fee cap on a private South Carolina loan, so a late charge should be a reasonable estimate of the lender actual costs from a late payment rather than an arbitrary penalty. For a regulated consumer loan, the South Carolina Consumer Protection Code allows a delinquency charge on an installment more than ten days late, not exceeding five dollars or five percent of the unpaid installment (South Carolina Code Section 37-3-203).

• Put the Loan in Writing

  A loan need not be written to be enforceable in South Carolina, but writing it down is strongly advised. A signed written agreement lets you set the interest rate, the repayment schedule, and the default terms, and it is far easier to prove than an oral loan. Have both parties sign and date the agreement and keep a copy so the terms are clear if the loan is later disputed.

• 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 the loan must generally be filed within three years in South Carolina, running from the default or from the last payment or written acknowledgment of the debt (South Carolina Code Section 15-3-530). South Carolina applies the same three-year period to written and oral contracts, but a signed written agreement is far easier to prove, so keeping the loan in writing gives you the stronger position if you have to collect.