What is a loan agreement? A contract is an agreement between two or more parties to regulate a certain legal-patrimonial situation.
The loan agreement is an agreement entered into between a bank and a person (natural or legal person) that regulates the transfer of a sum of money or a quantity of fungible goods.
The loan can be interest bearing if there were “fruits” generated, ie interest, or non- interest bearing , if only the principal is returned and not the interest portion.
Loan agreement: when to sign it?
When to enter into a loan agreement? When a loan is requested from a bank or a finance company, a loan agreement is signed between the parties.
The contract is an agreement between the parties that establishes the conditions according to which the creditor entity grants a certain sum of money to a subject, which undertakes to return it in a certain period of time by means of the payment of installments.
The bank must declare the actual conditions of its offer and the customer must undertake to honor the obligation assumed, according to the agreed terms.
Loan agreement: the elements
Among the essential elements that must be contained in a loan agreement are the following:
- the amount of the loan and the methods of financing;
- the number, amounts and due dates of the individual installments;
- the type of financing;
- the Annual Global Effective Rate (APR) , which includes interest and ancillary charges;
- any guarantees required;
- the insurance premium.
The provisions contained in the contract are mandatory : failure to comply with even one condition entails the nullity of the contract .
Default of the loan agreement
Failure to pay an installment causes the loan contract to be breached by the creditor.
Failure to pay even one installment authorizes the lender to unilaterally terminate the contract.
There is a risk that your name will be included in the “black” list of bad payers and / or reported to credit protection entities (the Central Credit Register ).
The defaulting customer will be required to pay all bank and protest charges, as well as all charges incurred by the bank to recover the sums due.
For more information on the loan agreement, contact a consultant .