The loan applicant and the lender enter information about themselves and the proposed loan into the agreement form and sign it, states LawDepot. When signed, this form becomes a legal contract.
The form has the date of the contract at the top. The lender and the borrower write their names, addresses, cities, states and ZIP codes in the space provided in the form. The lender specifies the loan amount and interest rate in the appropriate spaces. Both parties should read and understand the provisions of the contract carefully. When they are satisfied with the terms, they execute the contract by signing and dating at the bottom, as provided by LawDepot.
The loan agreement describes a repayment schedule and may include late fees and prepayment penalties. The schedule is typically monthly over a number of years. The payments can be either amortized or interest only. If the loan is not paid off at the end of the term, a lump sum payment is required for the remaining balance, or for the entire loan amount if the payments are interest-only, as explained by LawDepot.
The loan contract is also known as promissory note, term loan, secured or unsecured note, and demand note, states LawDepot.