A loan agreement is a legal contract between a borrower and a lender detailing the conditions for the loan. It regulates the mutual promises made by each party. These are documented via a compilation of the various mutual promises made by the involved parties. Factors like creditworthiness, cash flow and any other collateral of the borrower are kept in mind to pledge as security for a loan. Loan agreements are mostly in written form.
The object of a loan agreement is that it determines the terms and condition between the lender and borrower. The agreement is binding on both the parties and is enforceable by law. There are many types of loan agreements. The loan agreements originated by commercial banks, savings banks, finance companies, insurance organizations, and investment banks are very different from each other and all feed a different purpose.
Here is an example of loan agreement template:
FOR VALUE RECEIVED, the undersigned, __________ (the “Borrower”), located at __________, __________, __________ __________, hereby promises to pay to the order of __________, (the “Lender”), located at __________, __________, __________ __________, the principal sum of __________ together with interest on the principal balance, and in accordance with the terms set forth below.
Payment. The principal amount of this Loan together with accrued and unpaid interest and all other charges, costs, and expenses, is due and payable on or before __________. All payments under this Agreement are applied first to accrued interest and then to the balance of the outstanding principal.
Prepayment. The Borrower has the right to prepay all or any part of the principal amount of this Loan, together with accrued and unpaid interest thereon, at any time without prepayment penalty or premium of any kind.
Costs and Fees. In the event of default, the Borrower shall pay to the Lender all costs of collection including reasonable attorney’s fees.
Waiver. The Borrower and all sureties, guarantors and endorsers hereof, waive presentment, protest, and demand, notice of protest, demand and dishonor and nonpayment of this Loan.
Successors and Assigns. This Loan will inure to the benefit of and be binding on the respective successors and permitted assigns of the Borrower. The Borrower may not assign its rights or delegate its duties under this Loan without the Lender’s prior written consent.
Joint and Several Liability. If there is more than one Borrower of this Loan, the obligation of each Borrower shall be joint and several under this Loan.
Amendment. This Loan may be amended or modified only by a written agreement signed by the Borrower and Lender.
Severability. In the event that any of the provisions of this Loan are held to be invalid or unenforceable in whole or in part, the remaining provisions shall not be affected and shall continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Loan.
Notifications. Any notice or communication under this Loan must be in writing and sent via one of the following options:
Governing Law. This Loan shall be governed by and construed in accordance with the laws of __________.
IN WITNESS WHEREOF, the undersigned has executed this Loan Agreement as of the date first stated above.
Signature of Borrower
This page intentionally left blank.
If you are on either end of a loan, you should consider creating a Loan Agreement to document the loan transaction. Before doing so, you may want to find out more information about what a Loan Agreement is and what it can do for you.
This is a specimen loan agreement template that will help you to formulate one according to your preference.