Elements Of A Personal Loan Contract

| January 2, 2012

The reason our economy is able to grow at the rate it does is with the availability of credit. It was not all that long ago many people thought it was shameful to be in debt. Debt is a tool and like any tool if used in the manner it was designed to be use a person can realize greater benefits.

Also like any tool if it is abused it has the potential to cause great harm, therefore discretion should be exercised. If you find yourself in need of credit you can reach out to a larger financial institution however these firms have criteria that not all people fit into, also these firms can charge a large amount of interest and fees. In these types of situations a Personal loan may be the course of action.

Depending on a person’s network of connections finding someone to offer you a personal loan could be relatively simple or complex. The next thing to discuss is the terms of the agreement. This would include but limited to the amount that is being pledged either money or something of monetary value. There must also be a usury fee also known as interest. The rate of interest is governed in certain jurisdictions so if the person willing to offer the contract has gone beyond these rates it would nullify the agreement.

The Personal Loan Contract should also clearly state when payment is due and is it a one lump sum repayment or spread out over time. Will there be any surety offered, this can be in the form of real or loose property, many people refer to this as collateral. Collateral is promised to the lender should the borrower default on their agreement the lender can take the collateral and dispose of it as they deem suitable to compensate them for their loss.

Even if dealing with family members or close friends when money is involved having a personal loan contract will remove any sense of ambiguity between the two parties. With all the terms clearly outlined and responsibilities. If there was a situation where no contract was prepared it could put both parties on odds with one another thereby jeopardizing the relationship. To draft up a person loan contract a lawyer is not required so long as both parties are agreeable and the amounts involved are not very substantial if the amounts are very large then seeking out a lawyer may be worth consideration.

Category: Payday Loan

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