Loan contracts are generally written, but there is no legal reason why a loan contract should not be a purely oral contract (although oral agreements are more difficult to enforce). Depending on the credit score, the lender may ask if guarantees are required for the approval of the loan. Use the LawDepot credit agreement model for business transactions, student education, real estate purchases, down payments or personal credits between friends and family. Acceleration – A clause in a loan agreement that protects the lender by requiring the borrower to repay the loan immediately (both principal and accrued interest) if certain conditions occur. The categorization of loan contracts by type of facility generally leads to two main categories: a Parent Plus loan, also known as the “Direct PLUS loan,” is a federal loan for students, obtained by the parents of a child who needs financial assistance for the school. The parent must have a healthy credit rating to obtain this loan. It offers a fixed interest rate and flexible loan terms, but this type of loan has a higher interest rate than a direct loan. As a general rule, parents would only benefit from this loan in order to minimize the amount of student debt for their child. A loan agreement is broader than a debt and contains clauses on the entire agreement, additional expenses and the modification process (i.e. to amend the terms of the agreement). Use a loan contract for large-scale loans or from several lenders. Use a debt note for loans from non-traditional lenders such as individuals or businesses rather than banks or credit unions.
Depending on the amount of money borrowed, the lender may decide to have the agreement approved in the presence of a notary. This is recommended if the total amount, the capital plus interest, is more than the maximum acceptable rate for the small claims court in the jurisdiction of the parties (usually 5,000 usd or 10,000 USD). The forms of loan contracts vary considerably from sector to sector, from country to country, but a professionally developed commercial loan contract includes the following conditions: a loan will not be legally binding without the signature of the borrower and lender. For additional protection for both parties, it is strongly recommended that two witnesses be signed and that they be present at the time of signing. The most important feature of a loan is the amount of money borrowed, so the first thing you want to write about your document is the amount that may be in the first line. Follow by entering the name and address of the borrower and then the lender. In this example, the borrower is in New York State and asks to lend $10,000 to the lender. They may also include advance information if the borrower is interested in prepaying the loan. Many borrowers are concerned about advances and you would be wise to include a clause in your credit agreement that talks about advance options, if any. If you allow a prepayment, you must include this information and details if they are allowed to pay all or part only in advance and if you charge a down payment fee if they wish.
If you charge a down payment fee, you need to state in detail how much it will be.