Loan Agreement Template
What Is a Loan Agreement?
A Loan Agreement is a legal contract signed between a borrower and a lender, in which a borrower receives a loan from a lender and is legally bound to pay it back. The purpose of the contract is to formalize all regulations concerning the receiving of the loan and paying it back, and state all of the terms that the parties have agreed on.
Different types of Loan Agreements can be distinguished depending on the parties that are entering the contract and its purpose. They can include:
Commercial Loan Agreement . This type of agreement is used when the loan is being taken for business purposes.
Personal Loan Agreement. A legal contract in which the borrower is receiving the loan for personal purposes. This is also the most popular type of Loan Contract.
Family Loan Agreement. A type of document where the borrower and the lender are relatives.
A Loan Agreement template can be downloaded below or you can make your own using our online form builder.
What Is a Loan Participation Agreement?
Sometimes the borrower requires an extremely large loan from the bank, and when this happens the bank seeks assistance. They sign a Loan Participation Agreement with other banks or financial institutions, in which they make them their co-lenders in that loan. In this case, the leading bank shares the risks and profits with other lenders that have signed the contract and became lenders.
Using this kind of contract has a lot of benefits for each party involved. The borrower receives their large loan, the leading bank receives the opportunity to give the loan (sometimes they have to refuse it since the loan is too big and lose the client), and the other lenders can participate in the loan and get profit out of it.
How to Write a Loan Agreement?
Writing a legal contract is always a time-consuming process. In order not to miss any important details the lender should include a few important parts in their Loan Agreement form, which include the following:
- Introduction. In the first part of the contract, the parties involved should state their personal information. For example, a Loan Agreement between individuals should designate their full names and full current addresses.
- Loan. The agreement should feature all the information about the loan, such as how much money is being lent, how and when it will be transferred to the borrower, the interest rate (if applicable), the purpose of the loan, etc.
- Terms and Conditions. Parties use this part of the document to designate all of the important terms and conditions, such as how the loan will be paid back, how often the payments will be made, how big the payments will be, payment instructions for the borrower (if there are any), etc.
- Prepayment. If the parties have agreed that the borrower has a right to pay the full loan back or make the payments earlier than they are scheduled, a section where it will be stated should be included in the contract.
- Rights and Responsibilities. The lender and the borrower should designate all of their rights and responsibilities in this part of the contract. For example, it can include the borrower's responsibility to pay the loan back on time, to use the loan in accordance with the purposes stated in the contract, etc.
- Security. If the loan amount is secured with a piece of the borrower's property, it should be mentioned here, The parties should describe the property that will be transferred to the ownership of the lender if the borrower fails to pay the loan back, stating its main characteristics and individualizing features.
- Penalties. If there are any penalties that the parties have agreed on they should be entered here. For example, parties should designate the late fee amount and how it will be paid.
- Signatures. The parties are entering the agreement should sign the document to express their consent with everything stated in it.
Parties can include other sections in the document that they have agreed on, such as severability, information about representatives, fees and expenses, successors, remedies, governing law, etc.
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Download Loan Agreement Template