Loan documents and loan contracts

A loan agreement is very important document for the both lender and borrower because it protects the interests of the both the lender and borrower. It is not easy for any party to deviate from the intentions of the agreement. Loan contracts must contain just and fair provisions in order to fulfilment of the all terms and conditions.

Loan contracts are enforceable in the court of law. It can be secured or unsecured.A secured loan contract requires the collateral but unsecured loan contact does not involve the collateral. Unsecured loan is always based on high interest rate.

Loan contracts can be oral or written. However, the courts always consider the written loan agreement form because it clearly defines the intentions of the both parties. There is no such legal requirement that loan contract must be in a written form. Witten loan contracts have become the demand of the time in order to avoid and minimise the disputes between parties that arise in a future.

A loan document must contain the date of agreement, advance amount, interest rate and methods of repayment. Usually, the parties prefer one of the four procedures for the repayment of the loan. Such as:

• fixed period;
• lump sum;
• interest only;
• Interest and principal.

The personal loan agreement is varied from commercial and other loan agreements. Personal loan agreements contain the:

• simple provisions;
• no such statutory, regulatory requirements;
• Fewer technical requirements.

It is not mandatory that personal loan agreement must depict the information about reasons behind the getting loan because personal loan contract is always less technical. However; the loan agreement form must contain the provision about the dispute resolution if any conflict arises between lender and borrower.

Loan contract must be signed by the parties in the presence of witnesses. It must provide the term of the loan.

It is paramount that borrower must read and understand the each paragraph of the loan agreement form before signing it. Because once the agreement form is signed; it becomes the legal document.

The lender has a right to file a case against the borrower if the borrower fails to fulfil the terms and conditions of the agreement.

A loan agreement form is superior to any other types of loan instruments. The line of demarcation between promissory note and loan contract is that

• loan agreement form is signed by both parties; and
• Promissory note is only signed by the borrower.

Under the law, the borrower is personally legally bound to fulfil the terms and conditions of the loan document in letter and spirit. Law does not let the borrower to assign the debt to third party with out seeking the lender’s consent.

Net Lawman offers different types of loan agreements such as:

Secured: by guarantor
This is a comprehensive agreement for a loan secured by a guarantor. It offers flexibility in that any of the lender, the borrower and the guarantor can be an individual or a company, and may be based in the UK or abroad. If the person or company to whom you are lending doesn’t have sufficient assets for you to be satisfied that the loan could be repaid, then insisting on a guarantor who does have sufficient worth is an option to consider.

Unsecured
This is a comprehensive agreement for an unsecured loan. It offers flexibility in that either or both of the lender and the borrower may be an individual or a company, and may be based in the UK or abroad. A verbal agreement may be enough to lend small amounts to people you trust, but even among family and friends, a formal record of terms will prevent a disagreement later. Where the risk of default is higher, or the arrangement is more complicated, it is essential to record the arrangement in a document like this one.

Secured: on financial instruments
This is a loan agreement where the loan is secured against financial instruments. This agreement offers flexibility in that the lender and the borrower can be an individual or a company, and may be based in the UK or abroad. This agreement allows you to use shares or other financial instruments as collateral for a secured loan. Often, personal assets of significant value are held jointly with husbands, wives or partners. For a borrower unwilling to risk the possessions of his spouse, or for a lender who wants distinct ownership of the asset or the ability to maintain the value of collateral in case of default, pledging a loan against company shareholdings can be attractive.

Loan agreement: secured
This is Comprehensive loan contract to settle terms relating to repayment of a loan. The loan can be secured by anything you choose. A secured loan means the borrower offers an item as collateral for the loan, where as an unsecured loan means there is no collateral.

Related documents: personal loan agreement | loan agreement template | loan agreement

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