What provisions should be included in the loan agreement?

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A lot of finance terms (e.g. APY, reference rate) appear in the loan agreement, the meaning of which may be unclear to some customers. It is good, therefore, if the financial institution also includes a glossary in the document, explaining the essence of all difficult terms.

 

Loan amount and currency

Loan amount and currency

The loan agreement must include a digital and verbal record of the loan amount and currency. If its subject is a sum expressed in a foreign currency, the beneficiary can, in principle, refund it in the Polish currency. An exception is the situation when the necessity to meet a benefit in a specific foreign currency is imposed by: an act, court order constituting the source of the liability or the loan agreement itself.

 

Loan return conditions

Loan return conditions

The loan agreement includes specific installment payment dates and / or the full repayment date. The agreement may assume that the funds should be returned with interest, in installments, or in a currency other than the currency of the loan. It may also indicate the place of performance or the method of repayment (in cash or by bank transfer). In addition, it should also specify whether in the event of early repayment the borrower will be entitled to reimbursement for the unused period.

 

Determining any repayment security

Determining any repayment security

Payday loans and other small loans do not provide any collateral for the repayment of the liability. In the case of larger amounts of financing, it is usually different and the lender can expect: a pledge on things, a guarantee, voluntary submission to enforcement, a promissory note, insurance or establishing a mortgage on the property (mortgage agreement). Regardless of the product, the form of security required should be clearly indicated in the contract.

 

Costs related to the loan

Costs related to the loan

Particular attention should be paid to the part of the contract devoted to the cost of the loan. It should clearly specify how much you will pay for borrowing money and what will be included in the cost of such a transaction. Importantly, all fees and commissions occurring here must be added up and presented in the form of the actual annual interest rate (APRC). This parameter shows the total cost of the loan in percentage and allows you to easily compare it with other market offers.

 

Rules for a possible extension of the repayment date

Rules for a possible extension of the repayment date

A good loan agreement also indicates the rules on which the repayment date may be postponed. The lender determines the amount of the possible fee for such an activity, as well as if he is willing to extend the refund deadline and how many times you can use such a solution. Remember that even if the contract lacks such a point, and you are struggling with financial difficulties, you can always communicate with the financial institution and ask to change the terms of debt repayment.

 

Consequences of non-payment or late payment

Consequences of non-payment or late payment

In each loan agreement you will also find provisions specifying what will happen if you are late with the payment or completely abandon the repayment of the debt. In this part you will learn which solutions the lender will use in this case and how much you will have to pay for them. This is usually about penalty interest for late payment and fees for prompts. If you ignore the request for payment, the consequences may already be more severe.

 

Terms of termination

Terms of termination

Termination of the contract can be carried out immediately, daily or weekly. The document defines the situations in which you and the lender can use this solution. The latter decides to terminate the contract if, for example, you provide false income data. It can do the same if you do not pay back the specified number of installments on time. Regardless of the reasons for terminating the contract, you will always be obliged to return the entire outstanding amount.

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