What is a framework loan agreement? Why is it needed? What does it give? What should it contain? Advise!
Framework loan agreement – what is it?
The framework loan agreement is nothing more than a document that sets out all the principles under which the financial institution lends money. It is worth remembering that when submitting the application, it should often be noted that all the conditions contained in this framework loan agreement are accepted.
But not only. In total, it is worth to write such a contract even when money is borrowed from relatives. In accordance with the maxim that the precautionary officer is always insured, the contract should not be signed if it is not familiar with its content . Especially when it comes to loans.
What must be in the loan agreement?
Each contract must be drawn up in an appropriate manner. That is why lawyers usually deal with the construction of such documents. They are best able to write it so that it is not ambiguous, that is, it does not raise any doubts. And what should be included in the loan agreement? Those are:
- parties to the contract – the lender and borrower must be clearly specified. For this purpose, the data contained in identity cards are necessary or in the case of a company, it is necessary to provide all information, such as name, address, NIP, KRS, REGON;
- subject of the contract – here enter what the subject of the contract is, so in the case of cash you should write that it is cash – provide its exact amount. It will be later taken into account for calculating the cost of the loan;
- duration of the contract – it must include the detailed duration of the contract, i.e. the day, month and year in which it was drawn up, as well as the time of its termination, i.e. the refund;
- the cost of the loan , i.e. interest, commissions, any insurance, preparation or operational fee, etc., all must be added up and presented as the Total Cost of the Loan;
- rules and deadline for repayment of the loan , i.e. whether its repayment will be by transfer or in person and at what time;
- security for loan repayment – sometimes the liability requires security. It can be a promissory note, surety or pledge;
- conditions for early repayment of the loan – sometimes it is possible to pay back the loan before the date specified in the contract;
- loan extension rules – sometimes it is possible to extend the loan in the event of problems with repayment, it is worth knowing the terms of such a service;
- the consequences of late payment – all information on penalty interest, paid reminders;
- rules for withdrawal from the contract – according to the law you have 14 days to resign from the loan and for no reason, it would be good to write in the contract how you should inform about it;
- complaint conditions – if the lender does not meet the loan conditions, it can be advertised. In addition, there must be information on how it can be reported and how it will be handled;
- conditions for terminating the contract – this section must contain information about the options for terminating the contract, especially the consequences.
- signatures of the borrower and the lender – are confirmation that both parties have read the contract and accept the provisions contained therein.
Framework loan agreement – why so important?
First of all, it should be remembered that the loan agreement is often the only confirmation of the amount borrowed , which costs have been agreed and the date of repayment. If any problems arise, this seemingly trivial document will protect the business – the only question is whether the lender or borrower? That is why it is necessary to ensure that the contract includes all the above-mentioned provisions, and also – that they are understandable.