What is a loan agreement?

 

It may be the case that, when facing a payment, the necessary money is not available to face it. If this amount is high, it is usual to request a loan , such as a quick loan , in a bank. Once the bank has verified that the applicant meets all the requirements for granting it, it sends the money to his account, after signing the loan contract, an essential document for it to have legal validity . Do you want to know more about this loan contract (between individuals)? Do not stop reading this article!

 

What is a loan agreement?

 

The document that is established between two parties and that reflects the delivery of an amount of money, or another fungible or non-fungible thing (what is known as commodious), is known as a loan contract, with the condition of returning something similar and in the specified period of time. This loan can be free (the bailment always is) or, on the contrary, be subject to the payment of interest.

 

A money loan contract is understood to be one in which an entity (lender) provides an amount, in a specific currency, with the commitment that the applicant (borrower) will return it under the agreed conditions (repayment period, installments, etc.), paying the corresponding interest and commissions.

 

Loan contract models between individuals, what are they?

The loan contract model between individuals depends on the good that is perceived. These might be:

 

- Commodious contract : establishes the loan of a non-expendable asset for use during a specific period of time, after which it will be returned under the same conditions in which it was obtained or, in case of deterioration, an equal one must be enabled. Is free.

- Simple (or use) loan contract : establishes the loan of an amount of money, or a fungible asset, to be returned within the term established in the document. This type of contract may or may not be subject to the payment of additional interest.

 

 

What parts does a loan contract consist of?

 

As in most operations of an economic, legal or legal nature, the granting of a loan must precede the signing of a contract that gives it legal validity (and full guarantees). Although it is not mandatory that this be carried out before a notary (it can be a private contract), it is recommended that a lawyer supervise the loan contract once it has been drawn up.

 

Although a loan contract between individuals may vary, in its terms, with respect to others, there are a series of elements that are common to all:

- Type of loan : indicate the type of loan, whether fast, personal or mortgage.

- Amount : amount received and to be repaid (together with interest)

 

- Maturity period : period of time that you have to repay the amount (and interest).

 

- Interest : price paid for the loan of money.

 

- Amortization of capital : conditions in which the borrower can repay part or all of the money lent.

 

- Commissions : amount to be paid for the operations derived from the loan.

 

- Conditions for termination of the contract in case of non-compliance with its obligations.

 

In addition, the loan contract must initially include both the lender (bank) and the borrower (loan applicant), as well as the way in which the money or object will be delivered, along with additional guarantees.

 

What formalities are most frequently required in a loan contract?

As we have previously indicated, the loan contract is the formalization itself, which makes them essential when it comes to legalizing this type of process. However, and given the risk that financial institutions assume with them, they usually require validation through:

 

- A policy that is intervened before a notary public : which gives it executive force in the event of any type of default by the borrower, allowing the entity to be able to claim its payment through a judicial procedure that will be faster and more effective.

 

- Public deed granted before a notary : required for mortgage loans.