Understand Your Loan
Before It Costs You

Your interest rate is 'Lender's Prime Rate + 8.5%' — but 'Lender's Prime Rate' is defined as 'the rate published by Lender from time to time in its sole discretion.' There's no reference to an external index (like WSJ Prime or SOFR), no rate cap, and no notice requirement for changes. They can raise your rate any time, by any amount, and you agreed to it by signing. On a $50,000 loan, a 3% rate hike costs you $1,500/year extra — indefinitely.

The lender can declare default if it 'deems itself insecure' about your ability to repay — even if you've never missed a payment. There's no objective standard, no financial metric, no requirement to show evidence. If their risk committee gets nervous about the economy, your loan can be accelerated to full repayment immediately. This is sometimes called a 'subjective acceleration clause' — and it's been struck down by courts, but you'd have to litigate to enforce that.

If you pay off the loan early for any reason — including refinancing with a different lender at a better rate — you owe a prepayment penalty of 5% of the outstanding principal. On a $100,000 loan with $80,000 remaining, that's a $4,000 penalty just for finding a better deal. For a personal or business loan, prepayment penalties above 2-3% are considered aggressive — 5% is predatory.

The loan amortizes over 20 years but matures in 5 — meaning your monthly payments are calculated as if you have 20 years to pay, but the full remaining balance ($45,000 of the original $60,000) is due as a lump sum at year 5. If you can't refinance or don't have $45K in cash, the lender can foreclose or sue. The balloon is disclosed but buried in an amortization schedule page that most borrowers never see.

You personally guarantee the loan 'unconditionally and irrevocably' — meaning if your business can't pay, the lender can pursue your personal assets including your home, savings, and investments. This is standard for small business loans, but the waiver of 'all defenses, counterclaims, and rights of subrogation' means you can't even raise legal objections when they come after you personally.

A late fee of 10% of the scheduled payment applies if payment is received more than 5 days after the due date — regardless of whether the delay was caused by postal service, bank processing, or an honest mistake. On a $1,200 monthly payment, that's $120 per late payment. Compared to typical late fees of 3-5%, this is punitive and compounds the financial pressure that leads to default.