Utah Loan Agreement

Introduction

Key Things to Know

1. 1

   A loan agreement is the signed record of the sum lent, the interest, the payment dates, and the remedy if the borrower stops paying. Since Utah imposes no cap on the rate a private loan may charge, whatever interest figure the parties record is enforceable.

2. 2

   Utah sets no general usury cap. Under Utah Code Section 15-1-1(1) the parties to a lawful contract may agree upon any rate of interest, so the rate you write into the agreement is the rate that controls. State the rate clearly as a number so there is no dispute later.

3. 3

   If a Utah loan agreement does not state a rate, the legal rate is 10 percent per year (Utah Code Section 15-1-1(2)). This default only fills a gap; to charge a different rate, write the agreed rate into the agreement.

4. 4

   You do not need a license to make an occasional private loan. Utah regulates persons who regularly extend consumer credit; under Utah Code Section 70C-1-302 that means more than 25 consumer-credit transactions in a year (or more than 5 secured by a dwelling), which a one-off personal loan does not reach.

5. 5

   Because Utah has no rate cap, the main limit is unconscionability. A court can decline to enforce a rate or term it finds unconscionable, so keep the rate commercially reasonable and make sure the borrower understands and signs the agreement.

6. 6

   A late fee should be reasonable. Utah has no flat statutory late-fee cap for a private loan, so tie any late charge to your real costs from a late payment; an amount that operates as an unreasonable penalty may not be enforced.

7. 7

   Put the loan in writing and spell out default and acceleration. Define default as a payment missed 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. A written contract can be enforced for six years (Utah Code Section 78B-2-309).

Utah Requirements for Loan Agreement

• Maximum Interest Rate (No General Usury Cap)

  Utah sets no general usury ceiling on a contract rate. Under Utah Code Section 15-1-1(1) the parties to a lawful contract may agree upon any rate of interest, so the rate written into the agreement is the rate that controls. State the rate as a clear number. The only real guardrail is that a court may refuse to enforce a rate it finds unconscionable, so keep the rate commercially reasonable.

• Legal Rate When the Contract Is Silent

  If a written loan agreement does not state an interest rate, Utah law fixes the legal rate at 10 percent per year (Utah Code Section 15-1-1(2)). This default only fills a gap when the parties did not choose a rate. Because Utah lets the parties contract for any rate, always write the agreed rate into the agreement so the 10 percent default does not apply by accident.

• Lender Licensing (Utah Consumer Credit Code)

  An individual making an occasional private loan is not regulated as a creditor in Utah. The Utah Consumer Credit Code regulates persons who regularly extend consumer credit; under Utah Code Section 70C-1-302 a person extends credit regularly only if they made more than 25 consumer-credit transactions in the preceding year, or more than 5 secured by a dwelling. Confirm your obligations with the Department of Financial Institutions before you lend repeatedly as a business.

• No Rate Cap Means the Written Rate Controls

  Because Utah imposes no general usury cap, the rate you write into the agreement governs and there is no per-loan interest ceiling for a private lender (Utah Code Section 15-1-1). The practical limit is unconscionability: a Utah court can decline to enforce a rate or term it finds unconscionable. Set a commercially reasonable rate, state it plainly, and make sure the borrower understands and signs.

• Late Fees Should Be Reasonable

  Utah has no flat statutory late-fee cap for a private one-off loan, so a late charge is judged under general contract law. Set any late fee as a reasonable estimate of the lender's actual costs from a late payment rather than an arbitrary penalty, because an amount that operates as a penalty may not be enforced. State the late fee and any grace period clearly in the agreement.

• Put the Loan in Writing

  A loan need not be written to be enforceable in Utah, but writing it down is strongly advised. Because Utah lets the parties contract for any rate, the written rate is what controls, and a silent loan defaults to the 10 percent legal rate (Utah Code Section 15-1-1). A written contract also carries a six-year period to sue. 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 Utah (Utah Code Section 78B-2-309), and for a credit agreement the period can run from the default, the last payment, or a written acknowledgment of the debt. Keeping a signed written agreement gives the clear, easier-to-prove period if you have to collect.