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A loan agreement is a legal contract between a borrower and a lender regulating the mutual promises made by each party. It is a formal document that evidences a loan. An agreement is a legal document and a written promise to repay the money that is described by the Agreement between the lender and the borrower. This document is used to record the terms between the parties including the method and amount of repayment of the loan and also the penalty in case of default of such payment.
1. Why is a Loan Agreement required?
A loan agreement is required in order to determine the terms and conditions between the lender and borrower. The agreement is binding on both parties. It is an important step as all the rights and liabilities of the parties are stated clearly and thus avoid future legal trouble and confusion. Its main purpose is to serve as written evidence of the amount of a debt, the terms under which the loan money shall be repaid - including the rate of interest if involved. It is a legal document and is enforceable in the Court of law.
2. What are the documents required for the Loan Agreement?
There are no specific documents required for the drafting and execution of a loan agreement. However, if there is security involved - papers evidencing the same would be required. Other than this, ID proofs of the parties in order to confirm the names and permanent addresses of the lender and borrower shall be scrutinized.
3. What are the legal considerations for a Loan Agreement?
A loan agreement is a legal document that includes clauses stating the terms and conditions between the parties. It needs to be printed on a judicial / e-stamp paper of the correct value and signed by both parties. It can be modified or amended as per the terms of the agreement.