Loan Agreement – What You Should Know?

Anytime a bank or a loan company prepares the necessary paperwork regarding to loans, they will inevitably refer to loan agreement. A loan agreement is a contract or document signed between lenders and debtors regulating the terms and conditions about the loan.

It is usually in written form, though oral contract is also applicable in some countries. It can be signed between corporations, between individuals, or between an individual and a corporation.

Loan Agreement – Its Purposes

Loan agreement is in fact a legal document plainly defining the details of a loan between two parties. It can be regarded as a proof that the lender agrees to lend and the borrower agrees to borrow and in corporate aspects, shareholders may also make use of it to borrow funds and securities from businesses.

Since the rights and obligations of both the lender and debtor are precisely demonstrated in the agreement, both parties should comply with them. As legal documentation, it can serve as proof in court should either of the parties violate the agreements. In this regard, it is a protection for both parties.

Loan Agreement – Types

There are many types of loan agreement owing to the fact that people borrow money for different purposes. A quick search through the internet, you will find various loan agreement templates, like templates for home or property loans, automobile loans, motorcycle loans, boat loans, student loans and many more. But generally loan agreement can be characterized in two ways: by the type of lender and by the type of facility.

Categorized by lender, loan agreement can be divided into two types: bilateral loans agreement and syndicated loans agreement. Term loans and revolving loans are the two primary categories by type of facility. There are also secured loan agreement and unsecured loan agreement, interest only loans and balloon payment loans and many more subdivisions.

Loan Agreement – Its Contents

Contents of loan agreement are varied from this type of loan to that type, but a professional drafted loan agreement should incorporate the following terms:

1) Both parties’ names, addresses, phone numbers and any other contact info

2) Total amount to be borrowed, date given and the location of transaction

3) Interest rate and the amount of interest to be paid during the course of the loan

4) The deadline of the loan and payment terms

5) If there is collateral involved in the loan, it also be noted

6) The purpose of the loan

7) Signatures of both the lender and debtor

8) Other rights and obligations of both parties

Along with the fundamental terms, the laws of government should also be applicable in the agreement so as to give it legal validity. For loan agreements concerning large sums of money, more provisions should be added, such as provision for penalties and liquidated damages, provision for fees of the lenders and for expenses, covenants relating to changes in parties and appointment of process agents and so on.

Get Templates

One can draw up a loan agreement template on his own, but the majority of people prefer to download one directly from online since it is convenient and contains all the info you need relating to a loan agreement. Downloading a template is very simple and you just need to find a reliable website, but many websites will require you to pay for downloading loan agreement template.


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How to Write a Loan Agreement?

Do you know loan agreement? Literally speaking, a loan agreement is a contract between lenders and borrowers regulating the terms and conditions about the loan. Any time a corporation has cash or loan related activities with another corporation or an individual, there will always be need for a loan agreement.