What is a loan agreement in South Dakota?

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 South Dakota 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 South Dakota places no usury cap on a rate the parties fix by written agreement (SDCL 54-3-1.1), but fills a blank rate at 12 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 South Dakota?

For a private written loan there is no maximum. South Dakota has abolished its general usury ceiling, so where the parties establish the interest rate or charge by written agreement there is no usury restriction (SDCL 54-3-1.1). Two limits still apply: if the agreement states no rate, the rate is the Category C rate of 12 percent per year (SDCL 54-3-4 with SDCL 54-3-16(3)), and a licensed money lender in the business of lending may not exceed a 36 percent annual rate (SDCL 54-4-44).

Is a written loan agreement required in South Dakota?

A loan does not have to be in writing to be enforceable in South Dakota, but writing it down is what unlocks the freedom to set the rate. SDCL 54-3-1.1 removes any usury ceiling only where the parties fix the interest rate or charge by written agreement; without a written agreed rate the loan is capped at the 12 percent Category C rate (SDCL 54-3-4). A written contract also carries a six-year period to sue (SDCL 15-2-13), so a signed agreement protects both sides.

Do I need a license to lend money in South Dakota?

Not for a one-off private loan. A South Dakota money lender license from the Division of Banking is required only of a person engaged in the business of lending money (SDCL 54-4-52). A person who makes five or fewer loans in a twelve-month period is exempt (SDCL 54-4-37.1), and a loan to a family member is not the business of lending money at all (SDCL 54-4-36). If you lend repeatedly as a business, you likely need a license.

What is the penalty for usury in South Dakota?

For a private written loan there is generally no usury penalty, because South Dakota sets no maximum on a rate the parties fix by written agreement (SDCL 54-3-1.1). The penalties fall on licensed or business lenders. A licensed money lender who exceeds the 36 percent annual cap commits a Class 1 misdemeanor, and the loan is void and uncollectible as to principal, fee, interest, or charge (SDCL 54-4-44). Lending as a business without a license is also a Class 1 misdemeanor (SDCL 54-4-52).

What interest applies if my loan agreement is silent in South Dakota?

If a written loan agreement does not state an interest rate, South Dakota applies the Category C rate. SDCL 54-3-4 sets the no-rate-specified rate at the Category C rate established in SDCL 54-3-16, and SDCL 54-3-16(3) fixes Category C at 12 percent per year. To charge a different rate, which South Dakota allows without a usury ceiling, you must state the agreed rate in a written agreement signed by the borrower (SDCL 54-3-1.1).

Can I charge a late fee on a loan in South Dakota?

Yes. Because South Dakota lets the parties fix the interest rate and charges by written agreement with no usury ceiling (SDCL 54-3-1.1), a late fee stated in the written loan agreement is permitted. No dedicated statutory late-fee cap governs a private written loan. A licensed money lender is different: every fee incident to the credit counts toward the 36 percent all-in annual cap (SDCL 54-4-44). Set any late fee clearly in the agreement and keep it reasonable.

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

For a written loan agreement you generally have six years from the default to sue in South Dakota. SDCL 15-2-13 allows six years to bring an action upon a contract, obligation, or liability, express or implied. Because the written period is long and easier to prove, keeping a signed loan agreement gives you the stronger position if you have to collect. Confirm the running date for your facts, since a later payment or written acknowledgment can affect it.

South Dakota Loan Agreement

A South Dakota loan agreement sets your loan terms, and the state puts no cap on the interest rate parties agree to in writing; 12 percent applies if silent.

Find out where you stand in South Dakota

What kind of loan are you putting in writing?

DocDraft provides document preparation, not legal advice.

Introduction

A loan agreement is a written contract that sets out how much a lender advances and how the borrower repays it, usually with interest, and South Dakota lets the parties fix any interest rate they put in writing. South Dakota stands out on interest: it has abolished its general usury ceiling, so where the parties fix the rate by written agreement there is no maximum interest rate at all (SDCL 54-3-1.1). Two limits still matter. If a written agreement does not state a rate, the law fills the gap at the Category C rate of 12 percent per year (SDCL 54-3-4 with SDCL 54-3-16(3)). And a separate 36 percent annual-rate cap from a 2016 voter initiative binds licensed money lenders who are in the business of lending, not a private one-off lender (SDCL 54-4-44). On licensing, a person engaged in the business of lending money needs a South Dakota money lender license from the Division of Banking (SDCL 54-4-52), but an occasional lender who makes five or fewer loans in a twelve-month period, or who lends to a family member, is exempt (SDCL 54-4-37.1; SDCL 54-4-36). Once the rate is set, a sound South Dakota 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 agreement is what removes the interest ceiling, a lawsuit on a written contract can be brought for six years (SDCL 15-2-13), and a clear signed agreement protects both sides if the loan is later disputed. DocDraft builds your South Dakota loan agreement from your facts, with attorney review available before you sign.

Key Things to Know

1
A loan agreement puts a private loan on paper: the amount, the payment dates, the interest, and what happens on default. Because South Dakota sets no usury ceiling on an agreed written rate, the interest figure you record is the one that binds.
2
South Dakota has no usury cap on an agreed written rate. Where the parties establish the interest rate or charge by written agreement, there is no maximum interest rate or usury restriction (SDCL 54-3-1.1). This is South Dakota's defining feature: a private written loan may set the rate the parties agree to.
3
A 36 percent annual-rate cap applies to licensed money lenders. Under Initiated Measure 21 (2016), no licensee may contract for or receive finance charges above an annual rate of 36 percent, counting every fee incident to the credit; a violation is a Class 1 misdemeanor and voids the loan (SDCL 54-4-44). This cap binds the business of lending, not a private one-off lender.
4
If a written loan agreement does not state a rate, South Dakota fills the gap at 12 percent per year. The no-rate-specified rate is the Category C rate (SDCL 54-3-4), and Category C is fixed at twelve percent per year (SDCL 54-3-16(3)). Write the agreed rate into the loan so this default does not apply by accident.
5
You do not need a license to make an occasional private loan. A license is required only of a person engaged in the business of lending money (SDCL 54-4-52). A person who makes five or fewer loans in a twelve-month period is exempt (SDCL 54-4-37.1), and a loan to a family member is not the business of lending money at all (SDCL 54-4-36).
6
The written agreement is what lifts the interest ceiling. SDCL 54-3-1.1 removes any maximum rate only where the parties set the rate in writing; without a written agreed rate the loan is limited to the 12 percent Category C rate. Have both parties sign and date the agreement and keep a copy.
7
Spell out default and acceleration, and mind the deadline to sue. Define what counts as default (usually a missed payment past a stated grace period), include an acceleration clause so the lender can demand the full balance at once, and remember a lawsuit on a written contract must be filed within six years (SDCL 15-2-13).

Key decisions before you file

Before you file a Loan Agreement in South Dakota, 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

SOUTH DAKOTA LOAN AGREEMENT (Written loan of money with interest and repayment terms; South Dakota 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. South Dakota places no maximum on a rate the parties fix by written agreement (SDCL 54-3-1.1), so the Lender and Borrower may agree to the rate stated here. If this agreement is left blank as to rate, South Dakota law applies the Category C rate of 12 percent per year (SDCL 54-3-4). A licensed money lender in the business of lending may not exceed a 36 percent annual rate (SDCL 54-4-44).
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.
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 South Dakota.
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 South Dakota loan-agreement skeleton for a private written loan. An individual making an occasional loan (five or fewer in a twelve-month period, or a loan to a family member) is generally not required to hold a license; a person in the business of lending money needs a South Dakota money lender license from the Division of Banking (SDCL 54-4-52). Put the rate in writing, because a written agreed rate is what removes the interest ceiling (SDCL 54-3-1.1), and keep the signed agreement, since a lawsuit on a written contract must be filed within six years (SDCL 15-2-13). For the complete builder and other states, see the full Loan Agreement template hub.

South Dakota Requirements for Loan Agreement

No Usury Cap on an Agreed Written Rate
South Dakota has abolished its general usury ceiling. Where the parties establish the interest rate or charge by written agreement, there is no maximum interest rate or usury restriction (SDCL 54-3-1.1). For a private written loan this means the Lender and Borrower may set the rate they agree to. State the rate as a number in the signed agreement so the freedom to contract applies.
36 Percent Cap on Licensed Money Lenders
A separate cap applies to the business of lending. Under Initiated Measure 21 (2016), no licensee may contract for or receive finance charges on a loan above an annual rate of 36 percent, counting every charge incident to the extension of credit (SDCL 54-4-44). A violation is a Class 1 misdemeanor and the loan is void and uncollectible. This cap binds licensed money lenders, not a private one-off lender.
Legal Rate When the Contract Is Silent
If a written loan agreement does not state an interest rate, South Dakota applies the Category C rate. SDCL 54-3-4 sets the no-rate-specified rate at the Category C rate established in SDCL 54-3-16, and SDCL 54-3-16(3) fixes Category C at 12 percent per year. Always write the agreed rate into the agreement so this 12 percent default does not apply by accident.
Lender Licensing (Money Lender License)
A South Dakota money lender license from the Division of Banking is required only of a person engaged in the business of lending money (SDCL 54-4-52). A person who originates or acquires five or fewer loans in a twelve-month period, with total outstanding not over 4 million dollars, is exempt (SDCL 54-4-37.1), and a loan to a family member is not the business of lending money at all (SDCL 54-4-36). If you lend repeatedly as a business, confirm whether you must be licensed before you lend.
Late Fees on a Private Loan
Because South Dakota lets the parties fix the interest rate and charges by written agreement with no usury ceiling (SDCL 54-3-1.1), a late fee stated in the written loan agreement is permitted, and no dedicated statutory late-fee cap governs a private written loan. Set any late fee clearly in the agreement and keep it a reasonable estimate of the lender actual costs. A licensed money lender is different: every fee incident to the credit counts toward the 36 percent all-in cap (SDCL 54-4-44).
Put the Loan in Writing
A loan need not be written to be enforceable in South Dakota, but the written agreement is what lifts the interest ceiling: SDCL 54-3-1.1 removes any maximum rate only where the parties set the rate in writing, and without a written agreed rate the loan is limited to the 12 percent Category C rate (SDCL 54-3-4). A written contract also carries a six-year period to sue (SDCL 15-2-13). 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 South Dakota. SDCL 15-2-13 allows six years to bring an action upon a contract, obligation, or liability, express or implied. The period usually runs from the default, though a later payment or written acknowledgment of the debt can affect it. Keeping a signed written agreement gives the stronger, easier-to-prove position if you have to collect.

Find out where you stand in South Dakota

Introduction

Key Things to Know

Key decisions before you file

Customize your Loan Agreement Template with DocDraft

South Dakota Requirements for Loan Agreement

No Usury Cap on an Agreed Written Rate

36 Percent Cap on Licensed Money Lenders

Legal Rate When the Contract Is Silent

Lender Licensing (Money Lender License)

Late Fees on a Private Loan

Put the Loan in Writing

Default and Acceleration

Time Limit to Sue on the Debt

Frequently Asked Questions