Terms of the loan agreement and what to focus on
Before we talk about the features of the loan agreement, let’s look at what a loan agreement is.
The Civil Code says that a loan agreement is an agreement drawn up in writing, in which the lender acts on the one hand and the borrower on the other about the transfer of money for a period of time with interest.
Thus, under the loan agreement, the lender undertakes to transfer money to a borrower for a specific period, under specific conditions of circulation, and the borrower in return agrees to use it for specified purposes or for personal purposes, if the intended use of the agreement is not provided, and to return interest remuneration.
Main terms of the contract
Each contract consists of conditions that govern the relationship between the parties.
The law identifies two types of conditions: main and additional (optional).
Significant value of the main conditions, since these are the conditions, in the absence of which, the contract will be considered as not concluded. The absence of additional conditions in the contract does not entail such an effect. The obligation to comply with the main conditions is prescribed by law to the parties, and whether to add additional conditions to the contract or not – the parties decide on their own.
However, due to the specifics of the contract, only the lender contributes additional conditions to the loan agreement, since in these respects only the lender enjoys greater freedom.
Now consider what the main conditions of this contract:
- The subject of the contract – the subject of the transaction, it is exclusively money. The contract specifies the amount of funds and currency. If the subject of the transaction is a credit line, i.e. the bank’s obligation to provide the client not a one-time loan, then the agreement stipulates not just the size of these loans, but a limit on the amount of the credit line;
- Term – a specific time period during which money is provided, used and returned.
Optional terms of the contract
These conditions include the following:
- The procedure for the provision and return of funds – specific methods of payment. Today, e-money transfers deservedly gained considerable popularity, i.e. non-cash payments;
- Interest rate – a certain percentage is set for the use of money, that is, a specific markup;
- Interest repayment procedure – interest is repaid in two ways: in a differentiated and annuity manner. The first one assumes that the unpaid part of the loan is repaid. In the case of annuity, only interest is paid off at the beginning, and after the interest is paid off, the principal debt is paid off. The second method is more profitable to the bank;
- The purpose of using the funds is specific directions for which the borrower plans to use the money. If the purpose of the loan is not, then it is considered that the loan does not contain the purpose of use;
- The method of warranty performance of obligations – the methods offered by the Civil Code are used. But the most popular is a guarantee and a pledge. In this case, the subject of pledge is the property purchased on credit funds, and other property;
Terms of obligations of the parties – in case of violation of obligations, the parties provide for penalties, which include penalties and fines;
- Other conditions that the parties additionally provide.
These conditions should be included in the agreement only with the guarantee of accessibility and clarity, i.e. Clients should not only understand the text of the agreement, without special knowledge for this, but the information contained in the text itself is communicated to consumers of credit products in an accessible form. It is forbidden to reduce the font or visual distortion, in order to properly understand the text of the agreement.
What is a loan agreement from a legal point of view
Since the conclusion of the loan agreement is a weighty legal fact that entails the emergence of relevant legal relations. The conclusion of a contract can seriously affect the parties. But more vulnerable in these legal relations, is the client, i.e. the borrower.
Taking into account this moment, the state is trying to “protect” borrowers, but, unfortunately, this comes out one time and efforts are reduced to the good and old truth “saving a drowning man is the handiwork of a drowning man.” Therefore, in order not to “save” oneself, one needs to enter into an agreement only after careful study, in order not to fall into the “trap” of the bank.
The contract draws attention to the conditions listed above.
But more specifically, it is important to pay attention to the following points:
Banks often confuse customers when determining the date of making payments. Thus, the contract often specifies a date, not later than which the money should be transferred to the bank. Most borrowers believe that on this last day specified in the contract, have the right to transfer funds. It looks smooth, but it’s taken into account that the transfer of funds takes one hour and up to three days. This means that the money will be credited to the bank account after the specified date. Consequently, the occurrence of a delay for which a fine is provided will be formally legal.
Another nuance is associated with the early repayment of the loan. Thus, banks indicate in the contract that early repayment is allowed only after a specific time has expired, or that the rate on a loan rises for early repayment.
These points should be clarified beforehand. It will also be better to clarify what will happen to the loan. Thus, the bank reduces the size of the monthly payment or reduces the repayment term.
It is also important to know the nuances of customer service by the bank. Thus, banks sometimes set tariffs for certain operations that are not directly related to the loan. For example, service fees and account maintenance. These expenses are not fixed, therefore you should not trust the bank employees for a word, it will be better to take a documentary confirmation.