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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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Can the term 'Interest Rate' be substituted in a loan agreement

Resolved Question:

Can the term 'Interest Rate' be substituted in a loan agreement legally acceptable alternative term that has the same meaning and effect ?
What could that alternative term be referred to in the agreement ?
Many thanks
Submitted: 2 years ago.
Category: Law
Expert:  Ash replied 2 years ago.
Alex Watts :

my name is ***** ***** I will help you with this.

Alex Watts :

Could you please explain your situation a little more?

Customer:

The customer is seeking to enter an Installment Purchase Agreement to keep the loan off the balance sheet as a debt and does not want references to loan /loan agreement, interest rate, financing in the agreement. In other words, the agreement will be a loan in all but name and the customer accepts this ?

Alex Watts :

Ok, are they a business customer?

Customer:

Yes. Not an average consumer.

Alex Watts :

So you are charging a fee, but it is not interest.

Alex Watts :

What about an admin fee

Alex Watts :

Or a facility fee

Alex Watts :

Then its not interest.

Alex Watts :

Does that help?

Customer:

Yes thanks but we are only softening the terms. The agreement is to have the full effect of a loan agreement and if we change terms such as interest rate to 'payment installment rate' or 'payment installment charge' does that mean that it does not equate to interest rate at all and would not be interpreted as that ?

Alex Watts :

Yes I dont think you can have interest but the repayment includes admin fee etc

Customer:

OK. Thanks assistance.

Alex Watts :

Can I clarify anything else ?

Customer:

Just a final question then from me - In no way could the alternatives set out above i.e installment payment rate be interpreted as being the same as an interest rate in the agreement ?

Alex Watts :

Possible, but if you say its an admin fee it should be ok.

Alex Watts :

Never say never

Customer:

Yes but we want it to be interpreted as an interest rate not an admin fee ? It is not the intention to be an admin fee.

Alex Watts :

Yes I know but dont want to charge interest, hence this name instead

Customer:

We want to charge interest but under a different term in the agreement. The agreement must be a loan in all but name. This is only facilitating a customer particular purpose of the customer but from our perspective everything remains the same and must take effect as such. Is that unclear the way I am explaining it ?

Alex Watts :

Yes. That is why you call it an admin fee

Alex Watts :

So its not called a loan

Customer:

Yes. So the admin fee depending on how it is structured in the agreement will operate as an interest rate. Is that what your interpretation following my explanation of the situation ?

Alex Watts :

Yes, it is renamed as an admin fee, so is not an interest fee. I am not an accountant but showing like that should hopefully give you what you need

Customer:

Ok. Thanks very much. Your replies and explanations were very helpful to me.

Ash and 3 other Law Specialists are ready to help you