Credit agreements are concluded between borrowers and lenders. As a rule, these parties are private individuals and banks. Within such a contract, all loan terms and agreements are concluded that regulate the granting of loans on both sides. In this way, the agreed term, the monthly repayment rate, the type of loan and the interest are determined. All data on the contracting parties are also listed, as are special agreements and other components. The only exception to be mentioned is the overdraft facility, which is not subject to a credit contract and is usually granted informally.
Components in a loan agreement
- running time
- paying out
Borrowers and lenders form the basis of a loan agreement and are clearly defined as debtors and creditors. The amount of the loan and the day of payment of the sum of X must also be stated in the contract. During a construction project, partial payments can also be made, which are listed separately.
In the case of larger loans, the intended use is also decisive. This can also be found in the contract afterwards in order to clear up any subsequent misunderstandings. The interest rate and the term are to be mentioned on the terms. The contract states when the interest is calculated and when exactly the interest must be paid. This interest rate is fixed in the contract for a certain time. With long-term terms, the fixed interest rate is usually 10 years, possibly up to 20 years. For contracts with a variable interest rate, this changes with changes in the general interest rate.
The main contract components also include the purchase costs or the general loan costs. For example, the amount of the processing fee is to be mentioned, usually in the amount of a percentage. Loan repayments are another aspect. The contract can differ in terms of a final loan or a repayment loan. The total amount, i.e. all costs of the loan, must also be stated, including interest, additional costs and repayment.
If collateral is required, it must also be noted in the loan agreement. In the case of real estate, a mortgage or, more rarely, a mortgage is usually taken out. The new vehicle is also assigned as a security to vehicles. Of course, guarantees or life insurance can also be deposited. In another point there are various loan conditions. These can be expressed, for example, in special repayments. In the case of special repayments, the bank grants a certain amount that may be repaid annually in addition to the monthly installments plus interest. However, this does not always have to be the case.
The Credit Bureau clause is also included in the loan agreement, whereby the borrower allows the bank to query. The borrower must explicitly agree to a query, otherwise the loan cannot be paid out. At the end, a cancellation policy must also be listed. According to this agreement, borrowers have the option to revoke the concluded loan agreement within one week after signature. If this is not granted to the customer at all, the contract can be declared invalid even months later.
Credit agreements are binding and must be observed
A credit contract with his bank is binding unless it is revoked. This means that the bank must also adhere to the payment and must provide the money. From then on, the borrower also undertakes to comply with his part of the contract.