Another possibility of repayment is a lump sum payment. In this case, the borrower must pay the full amount borrowed at the same time as the interest required in a single payment. Once you have opted for the terms of the loan, you must create a debt. This document should contain the names of the borrower and lenders. At the beginning of the note, be sure to indicate the address of the borrower and the lender. A payment contract is a legally binding document between two parties – the lender and the borrower. It is done when a lender lends a certain amount of money to a borrower and they accept the terms of payment. The contract should contain information on how and when payments are made. It should also include all sanctions or royalties that had been discussed and accepted by both parties. Here are a few reasons why you should create such a document: an individual or organization that practices predatory credit by calculating high-yield interest rates (known as a “credit hedge”). Each state has its own limits on interest rates (called “usury rate”) and credit hedges to be illegally calculated higher than the maximum allowed rate, although not all credit sharks practice illegally, but misceptively calculate the highest statutory interest rate.
Depending on the loan chosen, a legal contract must be developed by specifying the terms of the loan agreement, including: I Owe You (IOU) – Acceptance and confirmation of money lent by one (1) party to another. There are usually no details on how or when the money is repaid or lists interest rates, payment penalties, etc. Under the late payment clauses, the contract should contain the addresses to which payments and communications are sent. The payment address would be the lender`s address, while the termination address would be the borrower`s address. While loans can be made between family members – a family credit contract – this form can also be used between two organizations or companies that have a business relationship. There may be deposits where the borrower is not able to pay on time. If that happens, the agreement should provide information on what to do. As a lender, you can ask the borrower to pay a penalty for late payments.
Otherwise, you can also set a process for late payments. You can either give extra time or immediately request a penalty if the payment arrives too late. The loan agreement should clearly state how the money is repaid and what happens when the borrower is unable to repay. Has a friend, relative or colleague borrowed money from you? Read our article with smart strategies that will help you get your money back. Acceleration – A clause in a loan agreement that protects the lender by requiring the borrower to repay the loan immediately (both principal and accrued interest) if certain conditions occur.