All of us have gone through the plight of financial struggles. Our income is not always enough to sustain our home and school expenses. That alone is frustrating enough. That’s why the option to get a personal loan is made available by banks and financial institutions. But before we get approved for a personal loan, we have to sign a personal loan agreement first. This type of agreement lays out the terms and conditions that the borrower has to abide by to get a personal loan. To know the comprehensive content of this agreement, continue reading below. Read More
A personal loan agreement is a legally binding document used to bind the borrower to the terms and conditions regarding the loan. The purpose of this agreement is to ensure that the borrower pays on time with accrued interest. The lender may be a financial institution, a bank, or an individual. Moreover, the computation of the interest is per annum.
The first and primary step to creating a personal loan agreement is to identify the parties involved. Indicate the full names and the mailing addresses of the borrower and the lender. The lender can be the name of the company representative, the company name, or both. Lastly, verify the identity of the borrower by securing a government-issued identification card.
Indicate the loan amount in both words and digits. The payment terms should indicate that the payment is on an installment basis and is payable on a designated date. Indicate whether the borrower should pay on a weekly or monthly basis. If you have another option, make sure to specify it in the document.
No banks and financial institutions offer an interest-free loan. However, if your bank or financial institution is an exception, state it. Indicate the interest rate in words and figures for the borrower to understand clearly. But remember, the interest rate you impose must be aligned with your state’s maximum usury rate. After that, list the payment instructions for the borrower.
Late fees are common when getting a personal loan. Indicate any late fees you want to impose on the borrower if you allow one. For the security provision, ask the borrower for the real or personal property as security or collateral for the unpaid amount. If the said property does not reach the payable amount, then the borrower still has an obligation to pay the remaining amount.
Include other additional provisions regarding the loan, such as the prepayment, remedies, acceleration, subordination, waivers by borrower, expenses, governing law, and successors. The document must explicitly state these provisions to avoid confusion on the borrower’s end. Apart from that, these provisions must be governed by the state where it operates.
It depends on the state that you belong to. Some states do not require you to notarize the legal document. Nevertheless, experts highly recommend it. A notarized personal loan agreement makes the whole thing official. It also helps you avoid legal complications.
Yes, personal loans can be a good idea if you have excellent credit. But if your credit is below satisfactory, there is a possibility that your interest rate will be so high—even higher than credit card rates.
Paying off your credit cards is one of the ideal reasons for getting a personal loan. You may be offered a low-interest rate, and the amount of interest you pay and the time it takes to pay off your credit are reduced.
According to Credit.org, loss of income, divorce, death, injury or illness, change of employment status, natural disasters, and military deployment are considered examples of financial hardship.
Banks and financial institutions even understand what it means to be empty-handed. It is difficult to get by, especially if your personal needs and obligations are not met because of financial shortage. But banks and financial institutions are clever enough to secure the money and not get played. And this personal loan agreement is the perfect instrument to avoid being taken advantage of. With the significant amount of money being loaned, it’s wise to hold the borrower liable from the beginning. Help secure your finances now with a personal loan agreement.