West Virginia Loan Agreement

Introduction

Key Things to Know

1. 1

   A loan agreement is the signed record of a private loan's amount, rate, schedule, and default terms. West Virginia keeps the interest on an ordinary written loan low, at no more than 8 percent a year.

2. 2

   West Virginia holds a private written loan to a low cap. Parties may contract in writing for interest at a rate not to exceed 8 percent per year (W. Va. Code Section 47-6-5(b)). Only regulated consumer lenders licensed under Chapter 46A may charge more, so keep a private loan at or below 8 percent.

3. 3

   If a West Virginia loan is not made in writing, the legal rate is 6 percent per year (W. Va. Code Section 47-6-5(a)). To charge above 6 percent, up to the 8 percent maximum, you need a written contract that states the rate.

4. 4

   You do not need a license to make an occasional private loan. A regulated consumer lender license is required only to engage in the business of making regulated consumer loans, meaning consumer loans at a finance charge over 18 percent by a person regularly engaged in lending (W. Va. Code Section 46A-4-101). A one-off personal loan is not that business.

5. 5

   The two rules work together. A private lender cannot charge more than 8 percent by written contract, and charging the higher rates that require a Chapter 46A license without one is unlawful, so keep a private loan at or below 8 percent and state the rate clearly.

6. 6

   A late fee should be reasonable. West Virginia sets 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 lawsuit on a signed written contract can be brought for ten years (W. Va. Code Section 55-2-6).

West Virginia Requirements for Loan Agreement

• Maximum Interest Rate (Usury Cap)

  West Virginia holds a private written loan to a low cap. Parties may contract in writing for interest at a rate not to exceed 8 percent per year (W. Va. Code Section 47-6-5(b)). State the rate as a number and keep a private loan at or below 8 percent. Only regulated consumer lenders licensed under the Consumer Credit and Protection Act may charge more, within their own statutory limits.

• Legal Rate When There Is No Written Contract

  If a West Virginia loan is not made in writing or does not state a rate, the legal rate is 6 percent per year (W. Va. Code Section 47-6-5(a)). To charge above 6 percent, up to the 8 percent maximum, you need a written contract that states the agreed rate. Always write the agreed rate into the agreement so the 6 percent default does not apply by accident.

• Lender Licensing (Regulated Consumer Lender)

  A West Virginia regulated consumer lender license is required only to engage in the business of making regulated consumer loans, meaning consumer loans at a finance charge above 18 percent by a person regularly engaged in lending (W. Va. Code Section 46A-4-101). An individual who makes an occasional personal loan is not in that business, and a private loan cannot exceed 8 percent by written contract anyway, so no license is needed. Confirm your status with the Division of Financial Institutions before lending as a business.

• The 8 Percent Cap and the License Work Together

  A private lender in West Virginia cannot charge more than 8 percent by written contract (W. Va. Code Section 47-6-5), and the higher rates that a Chapter 46A regulated consumer lender may charge require a license. Charging above 8 percent without that license is unlawful, so keep a private loan at or below 8 percent, state the rate clearly, and do not attempt to charge licensed-lender rates as a private individual.

• Late Fees Should Be Reasonable

  West Virginia sets 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 West Virginia, but a written contract is required to charge interest above the 6 percent legal rate, up to the 8 percent maximum (W. Va. Code Section 47-6-5). A written contract also carries a ten-year period to sue, far longer than for an unwritten contract. 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 signed written loan agreement must generally be filed within ten years in West Virginia (W. Va. Code Section 55-2-6), one of the longer periods in the country. An unwritten contract carries a shorter five-year limit. Keeping a signed written agreement gives the longer, easier-to-prove period if you have to collect.