The principal amount is the initial amount of the loan that the borrower owes to the lender at the time of signing the loan agreement. Once the borrower has started repaying the loan, the principal amount refers to the amount of money still owed to the lender at any given time. No one ever thinks that the loan agreement they have will be violated, but if you want to make sure that you can deal with the issue in case the terms are not followed, then you must have something to deal with it. This is just one of the reasons why it`s so important to include this section no matter what. Typically, lenders include a personal recourse provision. This allows the lender to request a recovery of the borrower`s personal property if they violate the agreement. In addition, you must create the number of days available to the borrower to remedy a breach of contract. If you include this, you will not be able to notify the recovery until this period has passed. However, this does not prevent you from contacting them for an update. The notice period, which is standard, is 30 days, but you can adjust it as you wish. Be sure to include all these details in this section so that there is no doubt about the steps you should take in case you are not repaid by the borrower.
You can also include information about early repayment in case the borrower is interested in repaying the loan earlier. Many borrowers are concerned about prepayment and you should include a clause in your loan agreement that talks about prepayment options, if any. If you authorize an advance payment, you must include this information and details, whether they are allowed to pay the full amount or only a partial amount in advance, and whether you will charge an advance payment fee if they wish. If you charge an advance payment fee, you will need to describe the amount in detail. Traditionally, lenders require that a percentage of the principal be paid early before they can pay the balance. If you do not authorize an initial payment, you must go into detail that this is not permitted unless you, the lender, give written authorization. In addition to the main sections described above, you have the option to add additional sections to manage specific items, as well as a section to make the validity of the document undeniable. Each loan agreement is different, so use the additional terms section of the agreement to include additional terms that have not yet been covered. In this section, you should include complete sentences and make sure that you do not thwart anything that was previously included in the loan agreement unless you indicate that a particular section does not apply to that specific loan agreement. Borrower: A person who borrows money from a bank, lender or financial institution. As a rule, the borrower signs a contract and accepts certain repayment conditions. This person can also be called a “principal borrower,” that is, the person who borrowed the “principal amount” or principal amount of the loan.
With any loan agreement, you will need some basic information that will be used to identify the parties who agree to the terms. You will have a section that describes who the borrower is and who the lender is. In the borrower section, you need to include all the borrower`s information. If it is a natural person, this includes their full legal name. If it is not an individual, but a corporation, you must provide the business or entity designation that “LLC” or “Inc.” must include in the name to provide detailed information. You will also need to provide their full address. If there is more than one borrower, you should include the information of both on the loan agreement. The lender, sometimes referred to as the owner, is the person or business that provides the goods, money, or services to the borrower once the agreement has been agreed and signed.