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Loan Agreements

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Loan Agreement

A Loan Agreement is a contract between a lender and a borrower which regulates the business transactions by stating the terms and conditions of the contract by mentioning the details of loan amount given to party, interest amount to be paid, method of repayment, term and legality in case borrower fails to repay the payment.

Why there is a need of Loan Agreement?

Lending or borrowing money is a big commitment, so it is important that rights of both the parties i.e. lender and borrower must be safeguard by loan agreement. The basic purpose of loan agreement is to not only to detail the amount of loan given and the terms of repayment of the same but also to describe the terms and conditions of loan that serves as a proof that loan has been given and that prevents borrower to shrink from its commitment to repay the loan amount.

What information needs to contain in Loan Agreement?

A loan agreement should contain below mentioned information:

  • Parties: A Loan Agreement should contain the parties to the agreement along with their correspondence addresses.
  • Loan Amount- A Loan Agreement must specify clearly the disbursed loan amount i.e. principal along period of disbursement if loan is given in parts.
  • Duration of loan: A loan agreement must stipulate clearly the duration or time period for which loan has been granted to the borrower.
  • Interest rate Clause: A loan agreement must specify the interest clause i.e. the rate of interest to be paid by borrower on principal amount along with penal interest or any additional charges required to be paid in the event of default in the repayment of loan amount and its interest.
  • Loan Repayment Clause: A loan agreement must detail the repayment clause that states how and when the loan amount is to be repaid by the borrower. The reimbursement can be a lump sum or can be paid on periodic basis as decided between the parties. In case of periodic installments, it must specify the number of installments due along with amount and the date when the installment becomes due.
  • Prepayment Clause: Both the parties have jurisdiction to specify prepayment clause i.e. repayment of loan amount before the specified due date. Prepayment of loan is generally allowed on the payment of additional penalty charges to protect the lender against the loss of interest charges.
  • Loan security: It is on will of the lender that a loan can be secured or unsecured. Lender can ask borrower to pledge certain assets such as immovable or movable property in order to secure its interest that is called as Secured Loan. Generally banks go for secured loans against unsecured loans, which are based and relied on your borrower’s income.
  • Legislation and jurisdiction of Court: It is important to mention this clause so that party may approach to local courts in case of default make by party in repayment of loan. Parties also need to mention jurisdiction of court to file a case.
  • Verification: Both the parties need to sign the loan agreement and verify the same in order to avoid any dispute in later stage. It is not obligatory to attest the same but some parties go for the same for better authentication.

What are the services Lawyerinc offers for Loan Agreement?

Our services:

Our comprehensive range of end-to-end solutions includes following:

  • End to end services for Loan Agreement.
  • We have expertise in drafting Loan Agreement..
  • We will get in touch with you through expertise in this field.
  • Our Experts shall guide you through the procedure and supply you with a detailed checklist of the required documents.
  • We shall verify the documents you provide
  • Free consultation for any enquiry that you may have about Loan Agreement.
  • You will get your Loan Agreement drafting done without any hassles.

*Any fee, stamp duty and miscellaneous charges shall be payable extra.

Do contact us in case of any query related to Loan Agreement and much more.

To avail any of the above-stated services, kindly establish contact by posting a query at our site.

Is Loan Agreement legally enforceable?

In order to make an agreement legally enforceable, it must fulfill certain legal conditions such as an offer and acceptance of that offer. Loan agreement reflects the understanding between the parties by mentioning loan amount, its terms and conditions and repayment of loan, where one party disburse the loan amount and other party accept the liability of the same and promise to repay the loan amount within prescribed period of time. So it makes it legally enforceable.

Is oral agreement valid?

Although oral agreements are valid but agreements in written form are given more authenticity and are considered as legally valid. As well it avoids any kind of issues between the parties in future.

Frequently Asked Questions

  • 1. What is an EMI?

    EMI is Equated Monthly Installments (EMIs) that comprise of both principal and interest. Generally borrower has to repay the loan amount on monthly basis in case of EMI.

  • 2. What is collateral?

    In case of Secured loan, lender keeps property or any other asset as Collateral in order to secure the loan. Lender can seize the collateral if borrower fails to repay the loan amount recoup its losses

  • 3. Are oral loan agreements are valid?

    Although oral agreements are valid but agreements in written form are given more authenticity and are considered as legally valid. As well it avoids any kind of issues between the parties in future.

  • 4. Can I file a recovery suit if borrower fails to repay the loan?

    Yes, you can file civil suit to recover the loan amount. Even criminal complaint can be filed before Judicial magistrate.

  • 5. How banks can recover the loan amount?

    Banks can approach Debt Recovery Tribunal (DRT) or can file case under SARFAESI Act to recover the loan amount. Banks can even approach civil suit to recover the loan amount.

  • 6. Why to get Loan Agreement drafted through lawyerinc?

    Lawyerinc is a complete blend of professionals from across the globe. In –house team of lawyers and attorneys, CA and CS. All professional work together in Lawyerinc, providing you end to end solution. It guarantees delivery in the shortest and most reasonable rate in India. It enjoys a global presence

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