When applying for any type of loan, the bank and the borrower enter into a bilateral agreement between themselves, called a loan agreement. This document regulates the relationship between the parties to the credit transaction and stipulates the conditions under which the creditor bank grants a loan to the borrower. Knowledge of the main points of the loan agreement will help the borrower figure out where to look for this or that information and understand what "surprises" can be expected from a credit institution.
Key points of the loan agreement
The first clause of the loan agreement (“subject of the agreement”) includes basic information about the loan - its size, maturity and interest rate. This item also contains information about the bank details and personal data of the borrower. If a target loan is issued, then the loan agreement necessarily specifies what the loan funds should be directed to, and if necessary, the borrower, upon request, must document the intended use of the loan received.
The next section, which is present in all bank loan agreements, concerns the procedure for issuing and repaying a loan. In this paragraph, you can find information on the amount of monthly payments, the order of writing off funds, bank commissions, payment terms, the procedure for partial and full early repayment of debt. In the same section, the bank warns of the consequences in case of delay in loan payments and the amount of penalties for delay.
Rights and obligations of the parties
These two clauses of the loan agreement indicate the mutual obligations of the creditor and the debtor. The borrower undertakes to make payments on the loan on time, inform about changes in personal data (change of name, registration, change of passport, change of mobile phone number, etc.). The bank, in turn, undertakes to write off funds on time to repay the loan, provide a modified payment schedule, notify in advance of any changes and transfer information about the loan to the credit bureau.
It should be noted that a credit institution has much more rights than obligations. So, the bank has the right to unilaterally change the terms of the loan agreement, assign the loan debt to third parties (sell the debt to a collection agency), charge fines, demand early repayment of the loan, etc.
The information about the client contained in the agreement can be used by the bank to advertise its services in the form of SMS messages. However, the client has the right to refuse such mailing.
There is one more section in the loan agreement, which concerns the collateral. If the loan is secured by any property, then the borrower is obliged to monitor its safety and not sell it without the consent of the bank. If a surety of an individual acts as security for a bank loan, then the loan agreement necessarily contains a clause stipulating the obligations, rights and responsibilities of the guarantor.
