November 10, 2019

Loan Agreement – what you should know?

Borrowing money is common. We take loans from banks, loans from non-banking companies to the indebted, and we usually borrow cash from our family or friends without interest. In this article we will focus on private loans. Before signing the loan agreement, you should read our tips.

An oral loan agreement

If the amount borrowed does not exceed USD 900, you do not need to draw up a loan agreement. Private loan can be granted orally. This may seem strange and unreliable, but there is actually a form of borrowing if small values ​​are involved.

Our advice: It is best to draw up a loan agreement for each borrowed amount, even if it is 50 USD. Having proof in the form of a contract or receipt, it is easier to recover the money borrowed.

What must be included in the loan agreement?

What must be included in the loan agreement?

The loan agreement is a fairly extensive document, so you need to focus and include all information during its preparation. Thanks to this, we will be sure that the prepared loan agreement does not contain errors that could prevent you from trying to recover money from the debtor.

Elements of the loan agreement

    1. Current date and place where the contract is concluded.
    2. Describing the parties to the contract – determining who gives the loan and who receives it. If the loan agreement is concluded between natural persons, please provide: name, surname, PESEL (personal identification number), place and date of birth, ID card number, address of residence – data refer to 2 parties to the contract.
    3. Definition of the subject of the contract – at this point we describe in detail what we borrow: things or money. If these are material things, you must describe exactly: size, size, color, etc. When borrowing cash, please indicate the amount and type of currency.
    4. Determining how the money is to be returned – here we determine whether the refund should be: with interest, if so, what; any installments; transfer or cash.
    5. Declaration of financial status of the borrower – it is a security in the event that the person who borrows money has not repaid them.
    6. Termination of the loan agreement – before the last element is the definition of the mode in which the agreement can be terminated.
    7. Legible signature.

The loan agreement may be in a foreign currency

The loan agreement may be in a foreign currency

If in section 3 (specification of the subject of the contract) we wrote that the loan is in a foreign currency, the borrower may repay its liability in dollars provided that there are no objections to this in the loan agreement.

At what exchange rate do you have to pay off a liability contracted in a currency other than USD? For this you should check the current exchange rate at the National Bank on the day of repayment.

Conditions of withdrawal from the loan agreement

Conditions of withdrawal from the loan agreement

If the borrower is in a bad financial situation and there is a risk that he will not repay the loan, the lender has the right to withdraw from the contract. In the event that the person who borrows money was aware of the poor financial situation of the other party, he cannot withdraw from the loan agreement.

Withdrawal from the loan agreement can be done in any form. But when the contract has been made in writing, its resignation must also remain in this form.

written by Pauline Kunkle - Posted in Loan