Any purchase that requires shelling out a substantial amount of money is easier accomplished with a loan application. Borrowing money could be for a vehicle, home remodeling, or debt consolidation.
But before any deal is sealed, both parties must first come up with a money lending agreement. This article will serve as a guide about how lending agreements work and how electronic signatures can help streamline the process.
What Is a Money Lending Agreement?
Also called a loan agreement, a money lending agreement is a formal written contract between a borrower and a lender. The agreement outlines the terms and conditions of the loan, the rights and responsibilities of both parties, and other covenants.
Furthermore, it will contain key details such as the loan amount, interest rates, amortization period, payment terms, and other fees. Signing a lending agreement translates to agreeing to all the terms and conditions. This includes the right of the lender to pursue legal action in the event of a loan default.
The Purpose of Lending Agreements
As in every transaction involving a sizable amount of cash, a lending agreement is important to establish legal safety. This applies to both parties. In case of non-payment, the lender could lay a claim of collateral that the borrower presented in the contract. If all else fails, the lender also has the right to take legal remedies.
For the borrower, a lending agreement is indispensable to prevent lenders from charging exorbitant rates. Without a money lending agreement signing, lenders may alter the terms to their advantage. Consequently, you may be required to pay unreasonable charges as there is no contract outlining set payment terms and conditions.
Types of Money Lending Agreements
There are four main types of money lending agreements. This include:
As the term suggests, this is the type of loan that does not require collateral. Instead, lenders will purely rely on a borrower’s creditworthiness. Some examples include student loans, credit cards, and personal loans.
This loan type requires collateral as a prerequisite for borrowing. This is especially the case for larger purchases such as a house and lot. Secured loans are also an option for borrowers whose credit scores fell short to qualify for an unsecured loan.
Revolving Credit Agreements
A borrower approved for revolving credit gives them access to funds repeatedly based on a lender-imposed credit limit. This could be done while also repaying an outstanding balance due in regular payments. The amount replenishes for each payment, but minus the interest rates and other fees.
An agreement detailing that loans are to be paid in regular payments over a set period constitutes a term loan. They last from one year up to 30 years, depending on the agreement and the purpose of the loan proceeds.
Key Components of a Money Lending Agreement
Many components comprises a money lending agreement and they are as follows:
- Loan Amount – This component sets the amount requested by the borrower and approved by the lender.
- Repayment Terms -This comprises the period in which the loan is expected to be fully paid upon the maturity date.
- Interest Rates – Interest rates, simply put, are the cost of borrowing money from a lender. Interest rates are typically computed annually.
- Collateral – To qualify for a loan, collateral, such as a car or a land title, is required. It will serve as a guarantee and security that the loan will be paid.
- Default Provisions – If a loan defaults, this will detail the remedies a lender can take. This includes taking legal action or claiming the collateral as outlined in the contract.
The Importance of Having a Valid Money Lending Agreement
Money lending agreements are vital for borrowers and lending institutions alike. But not all agreements can be valid and admissible in court should a lawsuit take place. Both parties must ensure that the agreement is valid and legally binding for their protection under the law.
A valid money lending agreement should ideally contain all the necessary details, such as the key components mentioned. Likewise, the borrower must be fully aware that an agreement is taking place and is knowledgeable enough. In other words, it means signing a lending agreement with all the terms and conditions fully understood.
Signing Money Lending Agreements Online
Signatures play a major role in the enforceability of all contracts and agreements. Traditional signatures, which are done manually, are gradually losing popularity in the present internet-saturated era. This is where money lending agreement signing online comes to light.
Electronic signatures are a legally binding way to sign contracts and agreements. The edge of eSignatures over its traditional counterparts is its invulnerability to forgery attempts. In other words, eSignatures are more secure than wet signatures. This is because the latter could be tampered with or altered.
In court, the authenticity of traditional signatures is also more difficult to verify. To do so, a manual-signature expert would be needed to make comparisons and scrutinize the authenticity of a paper-based signature. Moreover, manual verification is not always 100 percent accurate.
eSignature providers offer an audit-trail feature that can easily track the history of when and who signed a document. This means that a forgery can be prevented, or at least detected, with electronically signed documents.
One of the best paperless signing solutions in the market is Fill, which offers all of these features. Our eSignature platform has been serving many companies and professionals to streamline their workflow. Fill ensures that all contracts and agreements undertaken are legally binding and valid.
Fill: The Best Solution to Legally eSign Lending Agreements
Make your lending agreements valid and legally enforceable with Fill: an eSignature software to help ease your contract management processes. With it, you can sign, and allow someone to sign documents and agreements online anytime and anywhere.
In addition, Fill complies with all local, state, and federal regulations surrounding the use of eSignatures. This ensures that all your lending agreements have legal validity. Finally, Fill has military-grade security measures versus forgery attempts and identity theft. With our platform, you’ll be assured that your documents are safe in cloud-based storage.
Streamline your contract management processes with us. Sign up for free today.