Loan agreement is a mutually contracted document between the lender and the borrower regulating the promises by each of them. There are various types of loan agreement such as “facilities agreements,” “revolvers,” “term loans,” and “working capital loans.” The contract compiles lot of promises by two or more parties.
Signing a loan agreement is preceded by the doings of the borrower making true or legal representations of his financial affairs, creditworthiness and cashflow which is ready to keep at stake for a loan. Then, these representations are taken into serious considerations by the lender further allowing him to give money to the borrower.
Loan agreement reflects acceptance to an offer involving only legal situations. These are documented using commitment letters, promissory note and collateral agreement like mortgage papers. The loan offered by regulated banks are way different from other provided by finance companies as they receive a banking charter as an additional benefit. It is usually documented in a written format but there is no ban against the oral format of loan agreement. Many people do not support the latter one since it is very difficult to enforce.
Generally, commercial banks and other financial bodies do not categorize loan agreements. Their loan portfolios are divided into personal and commercial loans, further commercial loan is divided into industrial and commercial real estate. Industrial loans that are provided depend largely on the borrowers’ cashflow and bank statements or the mortgaged items. Commercial loans depends on those who would pay back the loan and it further is dependent on revenues generated by the rent collected from the space for the prolonged time. There are other types of loan and it depends on various other themes.
Agreements provided by different financial bodies vary largely from each other having different set of rules and regulations. Commercial and savings banks accept deposits and is profited from FDIC insurance incorporating the idea of public trust.
The insurance companies that collect premiums in lieu of giving property or life insurance conceptualize their own set of loan agreements. The banks and insurance companies’ documents are evolved from their individual cultures and policies that govern each financial body’s liabilities.
Investment banks provide those types of loan agreement whose investments they want; as they are the accredited ones and are not subjected to bank regulatory authorities. Their activities are looked after by SEC and they just concentrate on the documents and the promises made by the borrower who wish to take the funds.
Let’s have a look at the type of loans: bilateral loans, syndicated loans. If you divide the loan agreements on the basis of facilities, there are term loans and revolving loans. A term loan is repaid in instalments during a set span of time. Revolving loans where upto a set amount can be withdrawn from the bank and interest is paid on monthly basis on the withdrawn amount. These two loans are further subdivided into interest-only loans, and balloon payment loans, further dividing into secured or unsecured loan and more into fixed or floating.
At this point in time, you may already be aware on what a simple loan agreement is. the importance of this contract is widely discussed everywhere, and you may have already stumbled on a couple of different templates, outlines and drafts that will give you an idea on the things that may be included in the agreement. Although some of the templates are very similar to each other, it is still best that you are careful before signing any type of contract, especially if it deals with money talks. If this is your first time applying for a loan, or if this is your first time reading a simple loan contract, here are some important aspects that you have to check before placing your signature at the bottom of the page / document.
- Name, Date, Address
Basic information must be present when signing a simple loan agreement. You have to be sure that there are no typographical errors before signing the agreement. Remember that this is already considered as a legal document that can be used against you or can be used in the court, so you have to be careful about signing these types of papers.
- Interest Rate
Additionally, many people do not really pay attention to the numbers that are found in a simple loan contract. Although daunting, you have to pay extra care and become cautious when dealing with numbers, since this is where you will depend on when it comes to the payment terms and other matters that may deal with money and calculations. If possible, double check the calculations if you are in doubt about it.
- Other Terms and Conditions
There are many other things that are to be included in your simple loan agreement. It may also include additional or penalty fees, and before signing one, you need to be completely sure that everything that is written there is fully read and understood.
For those individuals who are turning to a lending company or a friend to help them cope up with their financial challenges, some think that getting approved for the loan is the only thing that is required and their problems are resolved. Aside from the mere fact that you need to budget your monthly income and that you need to pay for the required amount on a regular basis, you also need to take care of creating a simple loan agreement. This is a legal form of written contract that discusses all the important pieces of information that has been made during the agreement.
Some people do not even realize its importance until they have experienced the conflicts that may arise during the deal. To avoid these types of problems, having a prepared simple loan agreement is very important. The sad part is, not everyone is aware on what these agreements are all about and not all people are familiar on how these contracts must be written – despite the fact that everything that they need to know can be found online; even the templates are easily downloadable and they can have an outline ready within a matter of minutes.
Writing a simple loan agreement is not difficult. You only need to have an outline to follow, and you can fill up the needed blanks or details as you and the other party discusses the terms and conditions. It is important that both parties are present while this type of contract is being prepared – this way, you can personally and thoroughly discuss all the things that you need, the current interest rates, penalty fees and other terms and conditions associated with the loan. Even if you are borrowing a specific amount from a family or friend, you always need this contract – many people are not aware of it, but you’ll see and notice the benefits once you are already in the situation.
A simple loan agreement, is an example of a written contract that is used by both the borrower and lender to define the terms and conditions which occur between the two parties. At one point, there are examples of short loan agreements, while there are longer formats or templates that can be used. It usually varies on the type of loan and conditions that the two parties have set. Even though very important, some people have the wrong impression on what a loan agreement must include and what must not.
Considering the fact that every significant piece of detail must be included in the simple loan agreement, some individuals tend to forget adding the total amount of interest that will be accumulated during the period where the loan takes place. Additionally, penalty fees which may vary as well as interest rates must not be included in the loan agreement. The primary purpose for having this simple loan contract is to avoid confusions and to make sure that both parties will have something to refer to in the near future – but if the interest rates vary from time to time, including these details in the contract will not do any help. Instead, it can cause further problems and both parties may see conflicts arise.
Another common misconception about the simple loan agreement is that the creditor is the only one that benefits from it. The truth is, this contract is written so that both parties can take advantage of it, and there are specific reasons why this can be very helpful to both ends. Creating a written simple loan contract doesn’t have to be done by a lawyer – as a matter of fact, there are different ready to use templates that are downloadable from the internet, and you can take advantage of technology to use these templates for your own reasons.
Because of the struggling economy that majority of individuals are experiencing right now, some are left with no choice but to try different loan types to sustain their daily financial needs. These different forms of loans may generally vary with regard to the interest rates, mode of payment and other essential things. But even though a lot of aspects may be generally different from each other, one thing has to be always present with these types of loans – and it is the simple loan agreement. The loan agreement is a legal document where everything that you have talked about and agreed upon will be written and the lender and borrower will both have to sign these documents for it to be considered as valid. Without the sign of the other party, it means that the other party doesn’t agree to the terms and conditions written in the document, and the entire content may be considered as void.
Regardless if you are a borrower or a lender, having a simple loan agreement template can be quite important. First and foremost, you need to know which important aspects are to be included in the template. Sometimes, people miss out other important things just because they do not have a template or an outline to follow. Additionally, misunderstandings and further problems may be experienced since some people may have overlooked a couple of important details which are not included in the document, but have been agreed upon verbally.
To make sure that everything will run smoothly, especially if we are talking about huge loan amounts, it is probably best for you to have these simple loan agreement templates ready. You can have it saved in your favorite word processor and fill in the blanks or the needed details as needed. Sometimes, additional information may be included in the agreement, hence, do not forget to add a special note before the end of the page. Lastly, the two signatures are very important (plus witnesses if any) to make sure that the document is valid.
Regardless if you are a part of a lending institution, a banker or someone who personally grants loan to individuals and businesses, finding a simple loan agreement template is necessary. Although there is no particular format with regard to writing this agreement, some individuals find it really helpful if they can follow a particular guide whenever writing this form of document. This is because it includes all the important details that the lender and borrower will both agree upon, and a couple of skipped details may cause problems in the near future.
Simply defined, the simple loan agreement is a pre-made template or agreement where some parts have been intentionally left blank. The only thing that you need to do as a lender is to fill in the blanks and verify if everything that is written in the document is correct. This way, you can re-use the template for future loan applications and even make it easier for you to include all the necessary information that must be included in a loan agreement. You can save this template in your favorite word processing platform, have the blanks filled up and print it, or have the agreement printed out with the blanks with the necessary information filled up with handwriting. It all depends on the lender and borrower, but the important thing is, two parties must sign the paper before the agreement or the deal has to be done.
When looking for a simple loan agreement template online, always consider the reviews and the content of the template. Sometimes, you’ll see a very simple template which has missed some important details, while there are some other templates which look really complicated and may not be understood by the borrower. As much as possible, only use those templates containing straightforward information and format, to make it easier on both parties.
The simple loan agreement is to make sure that both parties will adhere to the things that they have agreed upon, and this written document is a solid evidence or proof just in case one of the parties will not adhere to it. It protects the lender and the borrower at the same time, with equal benefits and no one will gain advantage over the other. The lender and borrower’s signature must be placed at the bottom of the page, indicating that they have both agreed upon the amount and the other essential things written in the agreement. Regardless if you are an individual or applying a loan for a business corporation, it is important that you read the terms before placing your signature – the same thing goes with lenders.
Usually, when you go to lending companies, you will be required to sign a couple of documents which include details about the borrowed amount, the repayment price, interest rates and other important things that both parties have to agree upon. On the otherhand, if you are borrowing an amount from your employer, friend, relative or any other person that you know of, it is even more important to have some sort of written agreement. Verbal communication and agreement, even if you are very close friends may turn into a huge misunderstanding if it is not written – this is why it is important that you write a simple loan agreement that the lender and borrower must sign.
As you write your simple loan agreement, the lender and the borrower will both indicate the important things that are involved in the loan. This includes the date of the agreement, the total amount that is being borrowed, the interest rates, collateral (if any) and any other things that both parties have agreed upon. The agreement may generally vary from one situation after another. But the important thing is, everything is written, and both have agreed upon what is found in the document. The lender and the borrower must both carefully review the details listed in the simple loan agreement before placing their signature. As soon as your signature is placed in these documents, it means that you fully agree and understood all the terms and conditions of the loan, which now serves as a solid proof that both parties have to follow. Sometimes, people think that it is unnecessary, especially if they are borrowing money from a very close friend. But just for the sake of avoiding misunderstandings and other problems that may occur in the near future, it is still best to have a written agreement that both of you will sign and agree upon.
Regardless if it is an unsecured or secured loan, a simple loan agreement is greatly needed. This is most of the time the first and the last thing that both parties will look at during the agreement. It includes the current date, the amount that has been paid, the total amount of money borrowed, the interest rate as well as the repayment plan. There are many other aspects that have to be included, but these are the most basic things that must be found within the agreement.
In the finance industry, or if you are applying for a loan, you’ll usually hear the term simple loan agreement. What is it and what is its importance to the borrower and lender at the same time? Generally speaking, it is a form of legal document which lists the specific loan agreement between the two parties involved. This way, both parties will remain protected and the lender and borrower will have a documentation proving the specific conditions that they have both agreed upon before the transaction took place. Oral agreements will not bring you anywhere. At least, you need a written documentation since this serves as a solid proof on your end.
In the lending industry, you cannot avoid borrowers trying to say that “Hey, you agreed that the balance will be paid over the next 6 months”, or something similar to that nature. If you don’t have a simple loan agreement, it can be a bit difficult for you to defend your case if you are a lender. If you are a borrower on the other hand, it can be difficult for you to justify the interest rates that the lender gives you as compared to the rates that you have both agreed upon. However, the document will only include fixed interest rates, and not variable rates – to avoid further confusions.
So, for both parties to benefit from it and avoid complexities, a simple loan agreement has to be done. Regardless of how much the loan amount is, or no matter how long the period will be, this simple documentation plays an important role, especially if this is your first time applying for a loan. This is a simple form of documentation that you can hold when applying for a loan, in contrast to the complicated documents and papers that you may come across. At least, as a borrower, you can turn to this simple agreement whenever you feel like some things are not right, and you can justify and prove your rights as a borrower.
In times of need, lenders help the borrower to get a required amount of fund to fulfill the rapid monetary requirements. There are many types of lenders available in the financial market, who cater to the needs of the borrowers who are in need of instant cash supply. The lender may a private individual, bank, financial organization or others. Depending upon the type of lender; the terms of payment, interest rates and other condition of simple loan agreement may also vary. Lenders can reduce the risk involved in providing a large amount by taking any collateral as a pledge for the repayment of loan. A simple loan agreement can also be unsecured by any pledge that makes the lender bear high risk.
What is simple loan agreement?
Simple loan agreement is a form of agreement designed to obtain a debt. This agreement can constitute of two or more than two parties. The agreement contains the terms of payment, necessary information, rate of interest, amount of loan and other important data. To enter into the simple loan agreement, each party has to sign the agreement to legally adhere to fulfill the agreement terms and conditions. It is important that the age of the borrower who is entering into simple loan agreement must be more than 18 years of age, as no minor is legally allowed to enter into any oral or written agreement. Lender pays the loan amount to the borrower under certain conditions and borrower is bound to repay the loan within the time period agreed in the document. Interest has to be paid each month which act as a profit for the lenders. Depending upon the lender, simple loan agreement is divided into bilateral simple loan agreement and syndicated simple loan agreement.
Bilateral simple loan agreement
In bilateral simple loan agreement there are only two parties i.e. borrower and lender. This form of simple loan agreement is opposite to that of other type in which multiple lenders offer loan. The best part about the bilateral loan agreement is that it is easy to achieve and does not involve any complicated steps to follow. The lender has much power of deciding the term and interest rate in bilateral loans. The amount of loan when compared to syndicate loan is less and can be suitable for those who are need of small amount of cash. Bilateral simple loan agreement is the type of loan which is easy to get and most commonly found.
Syndicated simple loan agreement
In syndicated simple loan agreement, there is more than one lender involved in the agreement to provide the loan to the borrower. These agreements are specially designed to cater the need of big commercial houses or large business entities who are in need of hefty amount of cash for a project to start. To enter into syndicated simple loan agreement, an arranger is needed who can arrange all the lenders for the borrower. This arranger act as a mediator and works on fee. Mediators are usually financial banks which helps the borrower to get the simple loan agreement.
With the rise in unemployment and increase in everyday expenses, loan is becoming an essential part for unemployed as well as employed people. In case of any personal emergency, loan plays an important role in supplying the desired amount of money. Not just that, if a person is looking for a property or to buy a new car, he can get the help from lender to get instant cash by just signing an agreement. With the advancement in technology, loans are getting very much easy to obtain without undergoing cumbersome processes. Simple loan agreement is the simplest type of agreement that involves two parties, who agree on the term and conditions as decided between the lender and the borrower for the repayment of loan.
Definition of simple loan agreement
Loan is defined as an arrangement, in which two parties i.e. lender and borrower are involved. It is actually a kind of debt. Lender offers money or desired property to the borrower under an agreement for an agreed period of time, so that the borrower can repay the payment or return the said property combined with the pre agreed interest. Lenders usually offer the loan to the borrowers through a simple loan agreement that contains the repayment period and interest rate. There is a great risk associated with the lender’s money in case the borrower does not pay the loan back. An agreement is defined as a legally binding understanding in between two or more persons who are not less than 18 years of age. A legally enforceable agreement is basically a document that contains the term of contract, the amount of loan paid, rate of interest and other necessary items. Both the parties signing the simple loan agreement are bound to follow the agreement. There are two types of simple loan agreement on the basis of collateral. They are as follows:
Secured simple loan agreement
Secured loan agreement is a form of a simple loan agreement in which two parties or more agree on similar conditions. The important part about this simple loan agreement is that while making an agreement for providing the loan amount to the borrower, the lender requires a collateral or security in terms of any property, asset, jewelry or any valuable possession. This security acts as a guarantee that the borrower will repay the loan on the agreed time period. In case of bankruptcy or non-payment by the borrower to the lender, lender has the legal right to possess the collateral and can sell it off to recoup his payment.
Unsecured simple loan agreement
Unsecured loan agreement is a simple loan agreement, in which the lender provides money to the borrower by signing an agreement without taking any collateral as the guarantee. This simple loan agreement is therefore termed as unsecured as the lender is not secured by any security. In this type of simple loan agreement, lenders are at a high risk and there is an uncertainty that whether he will get the money back or not. Interest rates are quite high and term of agreement of this simple loan agreement is usually short term.