For Dryer Vent Squad, what interest rate is charged on money that is not paid on time for any installment?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
4. INTEREST DUE IN THE EVENT OF DEFAULT. In the event the Borrower fails to pay the note in full on the Due Date, the unpaid principal shall accrue interest at a rate equal to the lesser of [Percentage] per annum or at the maximum rate allowed by law until the Borrower is no longer in default.
- 5. ALLOCATION OF PAYMENTS. Payments shall be first credited to any late fees due, then to interest due and any remainder will be credited to principal.
- 6. PREPAYMENT. Borrower may prepay this Note without penalty.
- 7. ACCELERATION. If the Borrower is in default under this Note or is in default under another provision of this Note, and such default is not cured within the minimum allotted time by law after written notice of such default, then Lender may, at its option, declare all outstanding sums owed on this Note to be immediately due and payable.
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to the 2024 Dryer Vent Squad Franchise Disclosure Document, if a borrower fails to pay a note in full by the due date, the unpaid principal will accrue interest. The interest rate will be equal to the lesser of a specified percentage per annum (which is not provided in the excerpt) or the maximum rate allowed by law. This interest will continue to accrue until the borrower is no longer in default.
For a prospective Dryer Vent Squad franchisee, this means that any late payments on financing obtained through the franchisor will incur interest charges. The exact percentage of this interest is not specified in this section of the FDD, but it will not exceed the maximum rate legally permitted. It is crucial to clarify the specific percentage with Dryer Vent Squad before entering into any financing agreement.
Furthermore, payments are allocated first to cover any late fees, then to cover interest due, with any remaining amount applied to the principal. This allocation method is standard in lending agreements. The document also specifies that the borrower can prepay the note without incurring any penalties, offering some financial flexibility.
In the event of default, Dryer Vent Squad has the option to accelerate the debt, making all outstanding sums immediately due and payable. This acceleration can occur if the default is not cured within the minimum time allotted by law after written notice. Additionally, the loan is secured by the franchisee's Dryer Vent Squad business rights and related assets, which can be seized by the lender in case of default.