What Should A Proper Loan Agreement Include?

A Loan agreement is specific type of agreement that is signed between a lender and a borrower, which mentions that the borrower has taken a sum of money from the lender, which he agrees to pay back after some time along with an interest. Read and find out what should be included in a loan agreement in Vermont.

Loan amount

The contract should specify the amount of money that is being given by the lender to the borrower as loan.

Lender and borrower details

Such kinds of details should include the name, address etc as well as whether the borrower or lender is a corporation or an individual. A co-signer might also be added - who is supposed to give his or her consent for debt repayment, in case the borrower defaults on the loan.

Late fees and interest rates

In case interest is charged by the lender, as is done often, the percentage of interest must be specified in the loan agreement form and the fact that it will be compounded on an annual basis. Overdue payments may also be penalized by the lender by increasing the rate of interest or by charging late fees. The contract should mention this as well.

Insurance and collateral

The borrower might also be required by the lender to get insurance, in case the former is supposed to use the loan for the purpose of purchasing a vehicle.

The loan might be secured by the borrower with the help of collateral - such as a piece of jewellery, an equipment of good monetary worth or an expensive vehicle. In case the full loan amount cannot be repaid by the borrower, the collateral might be seized by the lender.

Method of repayment

The loan might be repaid by the borrower in regular payments or a single payment. The contract needs to outline the schedule of repayment, when the final loan amount would be due. It should also mention whether the loan can be repaid by the borrower in lump sum or early on.

Location of the lender

Generally, the location of the lender is chosen by people for the loan agreement. However, if the contract involves buying of assets, both parties might prefer to list the asset location instead.