The main purpose of concluding a loan agreement is to document the transaction. Regardless of who the money is borrowed from (bank, loan company, family, friends etc.), it is worth making a written contract.
This document should contain several permanent elements. Some of them should be given special attention so as not to regret later. What should you know before entering into a loan agreement?
What elements should the loan agreement contain?
A brief description of the most important elements of the document – loan agreement.
Parties to the contract
Each contract must contain information about its parties. The loan agreement will be concluded between the lender (the entity granting the loan) and the borrower (the person who borrows money and declares repayment of his debt within the set deadline).
In the loan agreement, it is not enough to just provide your name. It is necessary to place information from the ID card, i.e. the number and series of the document, social security number, place of residence.
If the lender is a non-bank company, the agreement should include data on the full name of the entity, address, NIP, KRS and REGON numbers. If a company is part of a larger company, then probably the company’s data will be on the loan agreement.
The loan agreement includes the lender’s and borrower’s handwritten signatures. The signature is a confirmation of reading the contract, acceptance and commitment to comply with them.
Loan amount and repayment date
The loan agreement must contain a record of the loan amount and repayment date. The amount borrowed should be expressed in number and currency and recorded in words, e.g. PLN 10,000 – in words: ten thousand zlotys.
The loan agreement should specify for how long the borrower may dispose of the money borrowed (e.g. 30 days, 6 months). In addition, the entries must include information on the date of signing the contract and the planned date of its completion. The deadline is also the final day of repayment.
Not all loans have a cost. Free payday loans for new customers are usually completely free as long as the borrowers pay them back within the prescribed period. In other cases, the contract must clearly specify how much the borrower will pay for being able to use the money borrowed. The document must detail all fees, i.e. commission, interest, preparation and operating fee, insurance if any. The costs should be added up and given as the total cost of the loan. The contract also includes information on the total amount to be repaid.
Loan return policy
The provisions regarding the principles of repayment of the loan usually contain the date of repayment of the last installment and most often it coincides with the date of termination of the contract. The loan agreement must contain information on how to return the money borrowed.
That is, it must clearly specify whether the money is to be transferred to the lender’s account or returned in cash, e.g. at a branch or through a representative of a loan company who will come home within a certain period. Regardless of how the loan is to be repaid, the contract must contain all the data enabling it to be repaid on time.
Possible debt repayment security
Some companies may require additional security for the loan. Most often it is a promissory note, surety or pledge. In the case of a bill of exchange, it is absolutely necessary to avoid blank promissory note. The security may also be in the form of insurance.
The terms of the security must be specified in the contract or a special annex to the contract. It is worth emphasizing that this is not a mandatory provision, because not all loan companies require collateral. However, if the lender requires a guarantee, this must be included in the loan agreement.
Early debt repayment option
As a rule, any commitment can be paid earlier, i.e. before the deadline specified in the contract. In this situation, the lender must reimburse the customer for the cost of
unused loan period. The loan agreement should contain provisions regarding any earlier repayment of the loan.