A promise-to-pay agreement, also known as a promissory note, is a legally binding contract through which one party promises in writing or orally to pay a definite sum of money to another party at a specified date. The agreement delineates the terms that determine the specifics of the lending process.Continue Reading
Promise-to-pay agreements typically contain the debt amount, interest rate and the date of issuance. They are a necessary part of any type of loan. In the case of mortgage contracts, the agreement between the parties gives the lender the right to take the home of the borrower in case he doesn’t abide by the terms set in the agreement.
There are two types of promise-to-pay agreements: written and oral. A written agreement needs to contain information pertaining to the repayment schedule so that it can be used as proof in court if one of the parties breaks the terms. Because oral agreements are difficult, although not impossible, to prove in court, they are typically employed in cases where the lender can afford to lose the owed sum of money.
Under the Truth in Lending Act, through which the federal government regulates promise-to-pay agreements, lenders are required to provide a statement that precisely delineates the cost of the loan, the rights of the borrower and the way lenders can assess further charges, such as late fees.Learn more about Credit & Lending
There is no difference between a home equity loan and a second mortgage when the homeowner receives a lump sum of money at once with a fixed or variable interest rate, explains SFGate. A home equity loan differs from a home equity line of credit, or HELOC, which provides the homeowner with a line of credit using the home as collateral, according to The Mortgage Professor. A home equity line of credit always comes with an adjustable interest rate.Full Answer >
A typical standby letter of credit includes a guarantee from a bank to pay a stipulated sum of money to a beneficiary and a description of the requirements for payment, reports Justin Pritchard for About.com. Standby letters of credit are safety nets that beneficiaries utilize when they do not receive payments or services that businesses agree to provide. Some landlords also accept them from tenants in lieu of cash for security deposits on commercial property, states Nolo.Full Answer >
A sample loan agreement is a document that outlines the details of a contract between a person needing to borrow money and the person lending it. The parties involved decide the terms of the loan and then sign the contract once they reach an agreement. Having a loan agreement ensures that everyone involved understands how much money is being loaned and how it is expected to be paid back.Full Answer >
An earnest money agreement is most often used in real estate purchases to exemplify the seriousness of a potential buyer or renter. The agreement involves the signing of a contract in which the potential buyer deposits a sum of money that acts as a down payment, explains Rocket Lawyer.Full Answer >