2. ► A loan agreement is the document in which a lender – usually a bank or
other financial institution – sets out the terms and conditions under which
it is prepared to make a loan available to a borrower. Loan agreements
are often referred to by their more technical name, "facilities
agreements" - a loan is a banking "facility" offered by the lender to its
customer.
WHAT IS A LOAN AGREEMENT?
3. ► The main purpose of a loan agreement is to clearly define what both
parties are agreeing to in terms of establishing the working relationship
and what responsibilities each party covenants to perform for the
duration of the loan.
► In many countries, the establishment of a loan agreement must meet
standards set by national and local laws. This arrangement is usually to
the advantage of both the lender and the debtor.
PURPOSE OF AN AGREEMENT
4. A loan agreement is of two types:
► Secured loan agreement.
► Unsecured loan agreement.
TYPES OF LOAN AGREEMENT
5. ► There are a number of issues that are addressed and defined even in
the simplest of loan agreements.
► Any fees as well as the applicable rate of interest is also specified,
making it possible to determine the final cost associated from the loan.
► The repayment terms are also defined, as well as how the interest rate is
applied.
► Agreements usually identify any penalties that may be involved with
paying the loan off ahead of schedule.
ISSUES ADDRESSED AND DEFINED IN
LOAN AGREEMENT
6. The following are the steps to enter into a loan agreement:
► Optimize your credit report.
► Establish a stable source of income.
► Gather documentation.
► Research loan types.
► Determine the amount of money you need to borrow.
► Find a lender.
► Enter into the agreement.
HOW IS LOAN AGREEMENT ENTERED INTO?
7. ► A Loan Agreement only defines the terms and conditions of a loan; in
order to create security for the sum borrowed a separate agreement is
also required. A Debenture is a document creating security; it secures a
loan using the borrower's assets.
NOTE !!!
