For this, you need to decide upon the agreeable ‘late payment’ date and the fees that come with it. If you do want an interest then you need to mention how you want the interest to be paid and if pre-payment of the loan will come with any interest incentive or not.ĭefaulting on a loan is a very real scenario, so is paying it back on a date later than the one that’s agreed upon. When it comes to a personal loan, if you don’t want any interest, the same has to be mentioned in the loan agreement.

You can choose between monthly installments or a lump sum amount. This includes the repayment date of the loan along with the payment method. While drafting the loan agreement, you have to decide on how you want the loan to be repaid. These terms have their own purpose in the loan agreement and hence it is important to understand the meaning behind these terms while drafting or using a loan agreement.Ī loan agreement has the name and contact information of the borrower and lender. Just like any legally binding contract, a loan agreement has certain terminologies that are sprinkled throughout the contract. Not only is a loan contract legally binding but it also safeguards the lender’s money during the loan repayment period. This highlights the importance of having a loan agreement handy and involving in the lending process. This puts the lender at risk and many have often experienced the drawbacks of this. Most loans, often personal loans are often done on a verbal understanding. A loan agreement will help set the terms in stone and protect the lender if the borrower defaults while it helps the borrower follow the agreement terms such as interest rate and the repayment period. A Loan Agreement is a legally binding contract that helps in defining the terms of the loan and protects both the lender and the borrower.

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