In the article we consider the essential terms of the loan agreement. The content of this document is a combination of obligations and rights of the parties. Unlike a loan agreement, responsibilities here lie on both sides.
This is an agreement that is concluded between a credit organization (bank) and an individual (legal) person - the borrower on the provision of funds in the amount previously agreed by the parties. Moreover, they must be returned by a certain date with interest. This agreement must be executed only in writing, otherwise the document will not have any legal force. We will understand the conditions of the loan agreement, material and additional, below.
The difference between a loan and a loan
In the first case, funds can be issued only by specialized organizations (banks), and in the second case, by any individual or legal entity (microfinance organization, for example). Money on the loan must be returned with interest, the loan may not provide for them. The first one can be issued only in currency, and the second can be in both monetary and real terms. Before talking about the essential terms of the loan agreement, we describe the general rules.
For all borrowers
Information on the general terms and conditions of credit institution agreements should be made publicly available under the law. Once developed by the bank, it is then reused.
These include:
- The currency with which the credit institution can work.
- Requirements for borrowers that must be met in order to participate in the program.
- Dates reserved for consideration of the application.
- Types of loan programs offered by the bank.
- Amounts that can be received and related interest.
- Possible ways to provide these amounts.
- Penalties that are provided for violation of the terms of the contract.
The annotation to the program must necessarily contain a list of general conditions, which is also legally fixed. Each client can independently get acquainted with this information without visiting the bank.
Essential terms of the loan agreement
Although the law governs the free will of the parties when concluding any agreement, there are certain conditions without which it will be considered non-concluded. They are called material and must be contained in any loan agreement. Before signing the document, the borrower, first of all, needs to pay attention to them, since this determines the fate of the transaction.
With essential conditions of the loan agreement, in contrast to the general ones, the client gets acquainted already upon signing the documents. They are developed separately for each, therefore they are also called individual. There should not be a contradiction between the general and essential conditions, otherwise the latter will be priority. Legislatively, the parties agree on their own, but in practice the bank provides a ready-made contract, and your business is to agree to it or not. Essential conditions, in turn, are primary and secondary.
Key material conditions
They have priority when signing a loan agreement. They are always placed on the title page, in bold. The essential terms of the loan agreement are:
- The currency in which the loan will be issued.
- The full cost of lending, which includes all payments that the client must make, their size and terms of payment.
- Annual interest and, if available, lump sum payments to the bank.
- Interest rate. Important: in some cases, its size may change due to an increase or decrease in the refinancing rate.
- Duration and fulfillment of obligations by the parties (these values, as a rule, coincide).
Amounts are recorded in numerical and capital form. What else do the essential terms of a bank loan agreement suggest?
The full cost of the loan is made up of the amount, interest rate, terms, other bank services in total. If interest is not fixed for the entire loan term, then on the cover page all possible indicators that will be applied after the loan is issued are mandatory. The loan currency is not subject to change throughout the contract period.
Background conditions
Although they are called secondary, they still have no less importance. They just attract the attention of borrowers in the second place.
The secondary essential conditions of the loan agreement include:
- Schedule of payments (indicates the exact number of payments for the entire period, frequency, size).
- Penalties (their rate is indicated).
- The ways in which obligations can be fulfilled. First, free (without commission), and then paid methods are registered (the full amount of payments must be indicated).
- Additional agreements that are concluded along with the main contract.
- Cash use scheme (in the case when a consumer loan is issued as a target, that is, it involves the allocation of funds for certain purposes).
- The rules and procedure for notifying the borrower of a credit institution about a change in contact information.
- The procedure for the assignment of the right of claim under the contract (the lender indicates that he has the right to transfer to third parties the rights of claim to collect overdue debts, and the borrower voluntarily gives consent to this).
- In the case of additional paid services that will be provided by the creditor, with the name and the exact price.
The term does not apply to the essential terms of this document. If it was not indicated in the contract, then the loan must be repaid by the client within thirty days from the day the creditor submits a request for this, unless the document provides otherwise.
Change unilaterally
The bank also needs to indicate the possibility of changing the essential terms of the loan agreement unilaterally. For example, without the consent of the client, he has the right to take any actions that improve the financial position of the borrower (for example, reduce the interest rate, reduce penalties, etc.). Such changes are impossible without entering the corresponding clause in the text of the agreement.
The contract may contain other material conditions by agreement between the parties. If necessary, the lender is obliged to explain to the borrower each clause of the agreement. The number and frequency of such consultations after signing the document is not limited in any way. We continue to consider the essential terms and contents of the loan agreement.
Other items
The conditions, the inclusion of which is not allowed in the contract, are prescribed by law, and their presence leads to the invalidity of the entire document:
- It is forbidden to charge an additional amount of money to ensure the fulfillment of obligations. As a guarantee, only movable and immovable objects can be accepted.
- You can not take a commission for the issuance of credit funds.
- It is also forbidden to stipulate in the contract such a condition according to which the bank will provide a new loan in order to repay possible overdue debts without entering into a new agreement.
- The Bank does not have the right to oblige the borrower to use paid services of third parties to fulfill its obligations under the document. For example, a lender cannot require a customer to make payments through another company if the service is paid.
Additional terms
Additional terms of the loan agreement are:
- Rights and obligations of the parties.
- Securing a loan.
- The property liability of the parties arising in case of violation of obligations.
- The grounds and procedure for terminating and amending the loan agreement.
- Dispute Resolution Method.
Below we talk about some of the nuances of concluding a loan agreement.
Pitfalls of lending
The borrower must always remember that payments must be made strictly on time. Moreover, the recommended payment date when transferring money through a third-party bank is usually indicated in the contract. In case of late payment, the company accrues interest, which must also be paid. At first, the amount will be small, and the client may not know about it. But then it begins to grow rapidly, and a decent debt is formed. The bank is likely to notify the client after the overpayment becomes significant. Therefore, it may turn out that the person regularly paid the loan, and at the end of the loan repayment he has a certain debt to the organization.
The contract indicates the need to notify the financial institution of a change of residence, passport data, etc. If this condition is not observed, the client may be required to return the entire loan amount. Of course, few banks do this, but it's still not worth the risk. A contract is a contract.
Indication of inaccurate information about guarantors may be considered by the bank as fraud, and it is punished already in court. This must also be remembered. That is why it is beneficial for the client to read as carefully as possible the conditions prescribed in the document, even before he signs it. We reviewed the essential terms of the loan agreement under the Civil Code of the Russian Federation. They always need to focus their attention.