A Loan Agreement is a type of agreement that is signed between a lender and a borrower, and stipulates all the T&C for granting loan to the borrower. It is possible to take a loan from a family member, friends, a lending institution etc. It is an important contract, which is needed regardless of who it is given to. Even when the loan is granted to a family member or a friend, having a loan agreement is always better. This can work as a legal contract which can settle disputes which might crop up later between the lender and the borrower. Know about some of the top contents of a standard loan agreement.
Loan Amount and Duration
The Principal Amount, or the amount of loan, is specified clearly by a loan agreement. This is the amount offered to the borrower. The period of time for granting the loan is also defined by such a document.
The interest rate that the borrower has to pay, along with the principal, is also stated by the form for loan agreement. It also specifies the extra charges or penal interest that needs to be paid in case of a default in principal and interest payment.
Prepayment refers to the early loan payment, or the payment prior to the due date. Loan prepayment is usually allowed on the penalty charges payment. There is levying of payment against the interest payment loss, for safeguarding the lender.
In a simple loan agreement, this is a main element. Such a clause mentions when and how the loan repayment would be made to the lender by the borrower. The repayment may be conducted on a periodical basis or as a lump sum. If periodical payments are chosen, the agreement must mention how many due installments are needed as well as the due date for the installment.
A loan may be unsecured or secured. Typically, for a secured loan, a vehicle, home or some other asset is pledged as a Loan Collateral. If a default happens, the security that is pledged may be used for getting back the loan amount.
A written contract signed between two parties, a Loan Agreement binds a borrower and a lender in a legal contract. It may be enforced in court in case one party is unable to, or does not, honor his or her part of the agreement. In this contract, the borrower tends to give his / her consent of repaying the borrowed sum of money to the lender at sometime in the future, possibly with interest. The lender, in exchange, is unable to change his / her mind and take a decision not to lend any money to borrower. This is particularly in case the borrower depends on the promise of the lender, and purchases something expecting that he / she would soon get the money. A personal loan agreement template is actually a document that is legally binding, and is signed between two people who want to enter into a loan transaction. A document of this type can establish – in a written form – the evidence of the T&C between two people – the Borrower and the Lender.
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