A loan agreement is a contract between a borrower and lender that outlines the commitments or promises made by each party. There are different types of loan agreements depending on the type of loan. There are also various components that make up an agreement depending on what kind of loan is involved.
Conditions of a Loan Agreement
Before a loan agreement is written and signed, the borrower and lender set forth various conditions and qualifications. The borrower will typically make a case for obtaining a loan by detailing his or her creditworthiness. This comes in the form of credit history, proof of income, and sometimes the promise of some kind of collateral.
The lender will take the borrower’s creditworthiness into consideration when detailing the conditions of the loan agreement. These conditions typically include the amount that will be lent to the borrower and other factors like the term of the loan, which is the amount of time, typically expressed in months, the borrower has to repay the loan.
The interest rate and consequences of late payments or defaulting on the loan are usually also spelled out in the loan agreement. Interest rates and other conditions of a loan agreement tend to be more favorable for those with greater creditworthiness. Meanwhile, those with lower credit scores or income tend to have higher interest rates, more required collateral, or other conditions that are detailed in the loan agreement.
For more information on what a loan agreement entails or the loan options that might be available, go to Liftcredit.com. Review the site for more financial terminology and to get in touch with financial and loan experts.