A Singapore personal loan that is coursed through a financial institution such as a licensed moneylender in Singapore require a loan agreement to be signed. This is not often what happens when a loan is between two individuals. A loan agreement is essential as it sets the expectation of both the lender and the borrower during the term of the payday loan. The lender and borrower will be working together during the duration of the loan that is why it is critical to ensure a good working relationship is in place. This good relationship is maintained and governed by the terms of a loan agreement. The elements of a loan agreement are as follows:
- The Payment (also referred to as “repayment”) Schedule
This is a schedule that shows the payment plan to be made by the borrower. The schedule also reflects the interest rate and other fees that are incorporated in the amortizations to be paid by the borrower.
- The Terms and Conditions of the Agreement
For every agreement, there exists the terms and conditions in which the lender and buyer agrees upon. These terms and conditions govern the rules of the loan agreement. Actions to be taken by both the lender and borrower must adhere to these terms to ensure that the relationship between both party can be maintained.
- The requirements that is needed from the borrower
As a borrower, there are certain documentation and certain actions that are required by the lender for the use of the money. The loan agreement contains these documentation and action to ensure that the obligation of the borrower is fulfilled for using the lenders money. These documentation and actions may be required to help the lender ensure collectability over the loan. There may also be actions that a lender may require a borrower to refrain from.
- Collateral that has been pledged and other guarantee.
There are cases where the type of loan is secured loan which requires the borrower to provide a collateral. It may be property or future income. And for the cases of business loan, it may be a lien over a portion of a business’ equity. Collateral is a form of security that is provided by the borrower to guarantee the lender collectability over the loan amount. Other guarantees may include payment to be made by a guarantor in case of default.