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 loan and also the penalty in case of default of such payment.
A loan agreement is required in order to determine the terms and condition between the lender and borrower. The agreement is binding on both the parties. It is an important step as all the rights and liabilities of the parties are stated clearly and thus avoids 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.
It should consist of all the necessary terms and conditions. The following are important terms that must be included in a loan agreement among others:
The relevant personal details of the parties such as full name, residential addresses and ages of the parties to the agreement,
Reasons for the loan,
Amount paid and the method of payment,
Duration or the term of the loan,
Security that is required to be given (if applicable),
Method of repayment of the loan,
Interest rate (if any),
Penalty clause explaining the details of what the penalty would be if the borrower defaults in repaying of the loan,
General clauses such as termination of agreement, applicable laws, arbitration clause, etc.) and
Date of signing of the agreement.
DRAFT OF LOAN AGREEMENT
LOAN AGREEMENT BETWEEN
________________________
AND ______________________
THIS AGREEMENT made and entered into at _______ this ____ day of_______, ______ BETWEEN __________________ hereinafter called "the Lender" AND ________________________ hereinafter called "the Borrower" and reference to the parties hereto shall mean and include their respective heirs, executors, administrators and assigns;
WHEREAS the Borrower is in need of funds and hence has approached the Lender to grant her an interest-free loan of Rs.________/- (Rupees ____________________ only) for a period of ____ years;
AND WHEREAS the Lender has agreed to grant a loan to the Borrower, free of interest, as the Lender and the Borrower have known each other since several years;
AND WHEREAS the parties hereto are desirous of recording the terms and conditions of this loan in writing;
NOW THIS AGREEMENT WITNESSETH and it is hereby agreed by and between the parties hereto as under:-
1. The Borrower hereto, being in need of money, has requested the Lender to give her an interest-free loan of Rs.___________/- (Rupees _________________________ only) to enable her to purchase a residential flat, to which the Lender has agreed.
2. The said loan is required by the Borrower for a period of ____ years, commencing from __/__/___ and terminating on __/__/_____.
3. The Borrower hereby agrees and undertakes to return the loan of Rs.___________/- (Rupees ____________________only), in instalments, within the aforesaid period of ____ years and gives her personal guarantee for the same.
4. The terms and conditions of this Agreement are arrived at by the mutual consent of the parties hereto.
IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed their respective hands the day and year first hereinabove written.
SIGNED AND DELIVERED by the Within-
named Lender in the presence
SIGNED AND DELIVERED by the Within-
named Borrower in the presence of
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.
No set procedure is applicable in the making of a loan agreement. However, once the agreement has been drafted by a lawyer, it should be specifically and carefully read by both the parties to the agreement. Any necessary changes required to be made shall be carried out and once the agreement is finalised, it shall be signed by both the parties along with the requisite witnesses. The loan agreement has evidentiary value when it is printed on stamp paper/e-stamp paper and signed by both the parties. The stamp paper value depends on the particular State in which it is executed. Each party should thereafter keep a signed copy of the Loan Agreement.
A loan agreement is a legal document which 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.
One of the first and the most important steps that you must undertake is to hire a good documentation lawyer as he/she is aware of the nitty gritty of the legal procedures and necessary requirements involved in drafting of loan agreements. A lawyer would draft a loan agreement, better than you can yourself, for obvious reasons. A lawyer has the necessary legal knowledge and experience to handle and draft such documents. He/She will be able to guide you and draft for you according to your particular situation - the facts, circumstances and needs involved. A documentation lawyer is aware of good drafting technique and the clauses that must be included in your agreement. Hiring a good lawyer in order to draft such important legal documents is a prerequisite and will help you in more ways than one.
hi, i have taken a loan from my relatives (Rs. 22 Lakh once and after that Rs. 10 lakh) to buy a property. can you please tell me the stamp paper on which i can make an agreement regards
Dear Sir/Ma'm
We can not tell you like that how much amount of stamp paper needed. just let us know if you want to make it from us. the only we will able to tell you that what to be needed or what not
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Both my parents invested money with a builder who gave them monthly interest by cheque for many years.After my mother passed away the builder started defaulting in the monthly interest cheques. Its been 2 years now and even after asking for the capital back many times the builder keeps delaying repayment of capital.When l threatened legal action he promised to give me post dated cheques. Can I get him to sign a loan agreement with me now and if he signs it now is it legally valid? My parents gave the money to him as a loan in 2001 but didnt get a loan agreement signed by him.
Dear Querist
An oral contract is also enforceable contract. If you inisist on signing of a loan agreement, than there is a possibility that developer may not agree. Since it is 2 years back that the developer started defaulting in repayment, your claim is within limitation period.
Evidences such as bank entries reflecting the disbursement of loan to him, interest being credited by developer etc will be required to establish your case.
To initiate legal proceedings send legal notice to Developer and thereafter you can initiate legal actions against him. You can go under civil action for recovering the money and for inflicting punishments on Developer under provisions of IPC you can initiate Criminal actions against Developer.
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High Court, Mumbai
what is the legal procedure to give cash as loan to someone..? if he not repay the money i have to move legal action action against him,what document i have to collect from him..? signed check is enough..?
A loan to a family member or a friend is usually an unsecured loan and the terms and conditions are basically undefined or indeterminate and demanding payback is often difficult. And if the loan goes bad, the relationship also sours. Moreover, such a loan is usually interest-free. This means you lose money.
Neither a borrower nor a lender be; for loan oft loses both itself and friend.You should not pay it in cash is the first very precaution you need to take. Pay it through only Bank a/c. Before paying take a letter of request for this loan addressed to you by your friend, then only issue an a/c payee cheque against receipt issued by your friend admitting the debt and promise to pay along with interest if any. Obtain acknowledgement from friend of having received funds . let him give in writing when he will repay the loan .
There are two ways to do this - a promissory note and a detailed loan agreement.A Promissory note is a written promise to pay a debt. It is a financial instrument, in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed, determinable future time or on demand of the payee subject to specific terms and conditions.A Loan Agreement (Loan Contract) acknowledges that there is a loan, specific promise to pay and also states that the lender has a right to recourse. Example can be a FORECLOSURE. If you want to have a right to recourse, then go for Loan Agreement instead of a Promissory Note.Also note that
Party to the contract should not be a Minor ( i.e. below 18 years of age or 21 year of age unless specified by court)
The conditions in the agreement should not be against the law.
The debt given is contracted either through a promissory note or loan agreement as explained above.
This remedy to get back your money from your friend or relative also applies to cases where a third party has given a guarantee on the money which you lent to your friend or relative.
Where a lender of money wants to get his money back from his friend or family he can file a summary suit.
When a person dishonestly induces another person by deceiving him to either deliver any property to any person, including himself, or to make, alter or destroy the whole valuable security or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, he has committed the offence of cheating.
Cheating is punishable under Section 420 of the Indian Penal Code, 1860. The offender shall be punished with imprisonment, simple or rigorous, for a term extending up to seven years, and shall also be liable to pay fine.
Dishonest and fraudulent intention must be established to make the defaulter liable of a criminal offence, whether criminal breach of trust, or cheating. Failure to do so would leave the debtor with a recourse to approach a civil court only.
In a case where the defaulter has no intention to repay the debt but has agreed to the terms of repayment with a malicious intention to induce the debtor to part away from his property, he has committed the offence of cheating.
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I am loan officer in a pvt company. I gave a mortgage loan to a customer with co applicant his son. After 4 months he refuse to pay loan installment and say "agreement pr mere sign nhi he or mere loan officer ne farzi sign kiye he. " then he write a complain to police station and also do complain to police commissioner now thanedar called me for forensic signature test. What should i do
If the process is genuinely follow than need not to worry. Follow the legal process and cooperate with police. Their is a chain of process to issue a loan and being loan officer you need not to worry about. Please transfer for take a suggestion for process by your legal department. They will handle the task for further assistance.
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