Facts About Loan Document Template For Personal Loan Agreement
A loan agreement is a loan document setting forth the details of a consumer or business loan
. It contains all the terms and conditions under which the lender will lend the borrower the money. It states the amount of the loan, when the amount will be lent, the repayment schedule, the interest to be paid by the borrower, and other conditions, terms, and warranties required by the lender from the borrower.
A
loan agreement covers many of the same points as a Promissory Note; however, it is a lengthier and more complicated document and covers a more complicated transaction.
Purpose of a Loan Agreement
A loan agreement is used for the following purposes:
Individuals or corporations can prepare
loan agreements to lend or borrow money.
Shareholders can use it to borrow money from the corporation in which they have invested.
The main purpose of a loan agreement is to clearly define what both parties are agreeing to in terms of establishing the working relationship and what responsibilities each party covenants to perform for the duration of the loan.
Types of Loan Agreements
A Secured Loan
Wherein the loan involves the attachment of collateral - say, your property or any fixed/movable asset- against the sum of money borrowed. You risk losing your home should you default on repayments.
Secured loans are an affordable way to borrow big sums of cash, although you will probably pay a lot of interest in the long run, because of the large number of repayments, plus there is serious risk involved because falling into prolonged arrears means the lender is entitled to the asset or assets linked to the debt. In the case of a mortgage this could mean losing your home if you experience ongoing problems in keeping up payments.
An Unsecured Loan
An unsecured Loan Agreement, also known as a personal loan, is where the loan is not backed by any form of collateral and the Lender has no entitlement to any of the Borrower's assets in the event of the Borrower failing to repay the loan.
Unsecured loans arent tied to any assets and the lender essentially trusts you to settle the debt as agreed with a contract. This usually means the amounts of money you can borrow tend to be lower with unsecured loans and you may pay a higher rate of interest compared to a secured loan.
Who is it suited to?
This agreement is ideal for either individuals including friends and family or businesses whereby money is being loaned to the Borrower and is to be paid back to the Lender in installments, with or without interest.
Uses of a Personal Unsecured Loan
You could get a personal unsecured loan for any number of reasons. You may wish to use it to:
Buy a car
Consolidate your debt
Take a holiday
Pay school fees
Plastic surgery
Private health care costs
And many more!
Advantages and Disadvantages of Unsecured Personal Loans
Advantages of Unsecured Personal Loans
Easier for the borrower. From the standpoint of how quickly your loan application can be processed, it takes much less time for a lender to decide on a loan that is unsecured as opposed to one that is secured..
Minimum of risk for the borrower. The lure for borrowers to choose secured personal loans is that many lenders will offer lower fees and interest rates for personal loans guaranteed by property.
Can be negotiated. Because it is an agreement, it can be negotiated and agreed by the two parties.
Legally binding. A loan agreement protects both parties and is a legally enforceable agreement.
Affordable. Taking out a personal loan from a bank or adding debt to your credit card can be expensive. Family members or friends often just want to help out and hopefully get their money back and not earn interest.
Available. Sometimes loans may not be available from corporate lenders because of low credit ratings or lack of security. Family and friends may be willing to help based on their knowledge and trust.
Disadvantages of Unsecured Person Loans
High interest rates. Because unsecured loans are backed only by trust, they're more of a risk for the lender, the higher the risk the higher it costs to borrow; borrowers with bad credit will face high interest rates if you have a good credit rating however, this will not be so much a problem for you.
Lower loan amounts. Depending on the amount of money you need, you may not get what you would like with an unsecured personal loan. While the amounts will vary from lender to lender, it will be difficult to get more than $10,000 for unsecured personal loans.
Lower loan terms. This goes hand in hand with the general restriction on the amounts given for unsecured personal loans. Term limits of three years or less will be common; some lenders may offer as much as five years. Lower terms, of course, means higher monthly payments
How Is A Personal Unsecured Loan Different Than Other Loans?
To begin with, if you do not have a home then there is no chance of losing it if you were to have trouble repaying the loan. On the other hand, you will probably end up paying more in interest payments.
This is only true because when a lender does not have your home as a way to ensure that they will get their money back, they charge higher interest rates. While there is undoubtedly much to consider to the proposition of a personal unsecured loan, they do offer you access to money when you need it even if you do not own a home.
Other Names for Personal Unsecured Loans
The majority of leading financial institutions in Scotland offers these loans and can also be referred to as
Personal loans
Unsecured loans
Tenant loans
Car loans and more
Key issues in Loan Agreements
Key issues to be included in loan agreements include:
the amount of the loan
when funds are to be advanced
amount of interest to be charged
documentation to evidence advancement of funds such as a promissory note
repayment terms and rights of prepayment if any
how and when payments are to be made
various promises made by the borrower
issues surrounding when a lien will be granted to secure the funds against any assets
events that would be considered default under the loan
remedies available to the lender in the event the borrower default or fails to repay the loan
provisions dealing with any other issues of concern to the lender or borrow
general legal terms
Witnesses and Sign
Generally speaking, there is no requirement for a witness or notary public to witness the signing of the loan agreement. However, depending on the nature of the loan and the governing law of the jurisdiction in which you're entering into the loan, you may be required to have witnesses or a notary public witness the loan agreement. Even if it is not required, having an objective third party witness the signing of the loan agreement will be better evidence when you need to enforce the repayment of the loan. Signing the note in front of a notary public is the best evidence that the Borrower signed the loan agreement.
Net Lawmans Unsecured Loan Agreement Templates
A loan can be made without entering into a formal loan agreement but this is never wise. Using a loan agreement means that there is a legally binding contract that records the terms of the loan. If a dispute were to arise regarding the loan then you can rely on the terms recorded in the loan agreement to enforce your rights in accordance with the terms of the loan agreement
Our unsecured
loan agreement template can be used by either an individual or a business, such as a company or partnership, so that you can use the
loan doc template for creating a
personal loan agreement or commercial loan agreements. The loan agreement is flexible and can be customised to suit the specific terms of the loan. For example interest is included as chargeable within our loan agreement template but can be removed to exclude interest if required.
Our unsecured loan agreement templates has been drafted by specialist commercial Solicitor and Barristers so you can have the peace of mind of knowing that you are putting in place a robust and legally binding agreement that has been professionally drafted.
by: Paul Johns
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