A loan agreement is a document indicating the details of a consumer or business loan. It includes information about the terms of the loan and other information. Loan agreements usually relate to loans of cash, but market specific contracts are also used to regulate securities lending. Having a well designed loan agreement template will enables you have a proper document ready when borrowing.
Loan Agreement Types
There are different types of loans for various purpose, we can categorize loans based on the nature of particular usages.
Real estate developing loans agreement: the loan is for either commercial or residential development. When applying for such loans, banks or lenders will usually evaluate particular projects and the qualifications of the particular developer
Agriculture loans are similar to commercial or industrial loans in that short term credit finances seasonal operating expense. Agriculture loans are associated with planting and harvesting crops. the proceeds are used to purchase inventory in the form of seed, fertilizer, and pesticides and to pay other production costs. Farm operators expect to pay the debt when the crops are harvested and sold.
A mortgage loan agreement is a common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
loan agreement template
When formulating your loan agreement template, it is important to have some key elements in your template
A format for a loan agreement typically includes: Borrower and lender, the amount and duration of loan, interest and the repayment method. This is the standard for an agreement of any kind of loan, although the order may vary and according to the type of loan.
The first key information in the loan agreement template is loan Interest. Many people do not realize that a non-interest loan rarely can be granted. The reason is that the IRS looks as a loan with no interest as a “gift” and that may trigger gift tax upon the lender.
The second key information in the loan agreement template is about loan default terms. Though many of us do not want the possibility that the money may not be returned, but it is important to have default clause in your loan agreement and the associated penalties if loan default does occur.
The third part of Loan agreement template is about prepayment: you should state whether the loan can be prepaid or other conditions.
The last part is about loan enforcement jurisdiction: One of the most critical tools to enforce and collect on the loan agreement template is knowing where a lawsuit will take place. Not specifying a choice of law and a venue for an enforcement action to take place can be devastating in the event that you need to collect on an outstanding debt.