A loan agreement is a legal document that is a binding for the signatories to the agreement. That means that the loan agreement is an important document signed by both the loan maker and the lender, and contains all the information about the loan and the terms for repayment. Even though it is a legal document, it is not necessary for a lawyer to draw up the agreement. It might, however, be necessary to have it notarized after it has been signed. It is noteworthy to know that it is not the notarization that makes this document legally binding, but the signatures of the two parties involved. The notarization is done in order to have another copy of the agreement held for safekeeping.
Contents of a Loan Agreement
A New Jersey Loan Agreement consists of two parties entering a mutually agreed-upon contract in order to facilitate a loan. The agreement itself is an outline or a step-by-step definition and procedure for the loan.
The first part of the agreement defines the wording of the agreement. This ensures that there is no misunderstanding or ill-defined terms and conditions with regard to the loan. The agreement defines the grounds of the loan and clarifies what the loan is all about. It includes the value of the loan, the interest rate, and the repayment period.
The second part of the agreement is a technical step-by-step procedure of the loan. It is the loan details that dictate how the loan is to be made, as well as how it will be repaid. The third part of the loan is the finer details of the agreement. Not only does it define the responsibilities of the two parties, but it also includes a provision as to what will happen when there is a default on the loan. The third part might also include procedures for revisions to the terms of the loans. It also includes provisions for items that are technically unforeseeable. This part of the loan is usually finalized only after careful and deliberate negotiations.
The fourth part of the loan is the term that may not be part of the negotiations or the loan agreement, but has an impact on the loan itself. Among other things, it defines the relationship between the parties to the loan. It also defines the tender and the pertinent law that governs the loan. If there are more than two parties, or one party is composed of a group of interests, then details to handle these situations are included here.
Keeping it Comprehensive but Simple
A New Jersey loan agreement does not have to be complicated. Like most legal documents, it should be kept as simple as possible, yet comprehensive to cover all necessary terms and conditions that affect all parties involved. It should cover the most common situations that may have an impact on the loan agreement, and should work even under extraordinary circumstances. If there are going to be any changes to the agreement, these would be appended as addenda. Although loan agreements are legal documents that are best prepared by lawyers, though there is no law which makes the presence of a lawyer necessary. For small loans a third party witness may be a good option to consider.
Negotiations towards the final loan agreement are tricky matters and there is a tendency to include too much information and even obscure scenarios when a lawyer writes it. But truthfully, keeping the loan agreement simple would help make it easily understandable for all concerned parties.