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Loan Agreement Purpose and Structuring

A loan agreement is the document which represents the formal evidence of a loan. The document also includes important details such as covenants, positive or negative ones, the information on the collateral such as loan type and its value, as well as guarantees, the applicable interest rates, fees, the conditions according to which the loan is to be repaid, and the period of repayment envisaged.

To sum up, the loan agreement contains the terms and the conditions that are pointed out so that the borrower can draw out a loan. The terms and conditions are set by the lender, which can be a bank, or another type of financial institution. In fact, the loan represents a type of “facility” that is offered by the lender, and that is why the agreement on the conditions under which a loan can be taken out is also referred to as a facility agreement. The agreement comprises four sections.

The first section contains the terms that are to be used in the document and their definitions.

The second section is concerned with the operational terms relevant to the agreement, which means that it points out the amount to be borrowed, the schedule of its repayment, and the interest on the repayment. The second section of the loan agreement is of special interest for the financial agents of the borrower.

The third section is dedicated to the specifics of the loan transaction; it contains the responsibilities of the borrower and the lender, the measures to be undertaken in the event of the borrower’s inability to repay the loan; there is also information on the extent to which changes can be made to the agreement. The third section is drawn up after detailed negotiations between the lender and the borrower.

The final fourth sections contains standard text including details such as contract information, the relationships that exist between the finance parties – in the event of more than one tender and more than one law that apply to the agreement.

Loan agreements fall into two main types, according to the type of lender, and according to the type of facility. With respect to the type of lender, there are bilateral loans and syndicated loans. Syndicated loans are provided by groups of lenders, and their structuring and arrangement, as well as their administration, are carried out by more than one bank, commercial or investment ones, and the lending banks are also referred to as arrangers.

Besides a standard loan for which a loan agreement is drawn up, there is another popular type of loan, the demand loan. That is a short term loan, with a period of repayment for up to 180 days. The date for the repayment of the loan is not fixed, and the interest rate for it is a floating one. The demand loan offers advantages for both borrowers and lenders. The lender can demand the repayment of the loan at any time, and on the other hand, the borrower does not need to adhere to a repayment in installments, as the repayment should be made for the entire amount. Furthermore, demand loans are easier to qualify for.

Family Loans – Make Sure Keeping It In The Family Doesn’t Bankrupt Your Relationship

If you need an extra few thousand dollars to make a down payment or to purchase a house, or are facing tuition fees or a car purchase, borrowing from a family member may be a good option. Thousands of Americans go this route every year. In fact, the person-to-person loan market, including private mortgages, is $65 billion annually. If you’re thinking of borrowing from or lending to someone near and dear, think through the impact it will have on your relationship first. Be sure to put key terms of the loan in writing and consider getting professional advice if the amount of the loan is substantial.

Family loans are tempting for several reasons:

they usually require less security, or none at all
the interest is often lower, or non-existent
the terms are more flexible
the lender is less likely to require a detailed business plan
If you’re the borrower
It’s convenient to get a family loan. But, if things go sour, relationships can suffer. Even though the Bank of Mom and Dad is the lender, you should treat the loan just as seriously as if it were an arm’s-length transaction.

If you’re the lender

You need to avoid putting your own financial future at risk. As a general rule, don’t lend more than you can afford to lose — there’s always the possibility you won’t be paid back. It’s OK to say no. Refusing a family member’s request for money now won’t be as painful as dealing with payment problems in the future.

Take an interest

There are tax implications for certain person-to-person loans. As always, you should check with a tax consultant to determine the requirements in your situation. However, as a general rule, there are no tax implications for either party for loans under $10,000. But you may be required to charge interest on loans of more than $10,000. And with interest-bearing loans — even if the rate is very low — the lender must declare the interest as taxable income. If the borrower is using the money for business purposes, he can generally deduct the interest when calculating profit.

Get it in writing

For smaller loans, you may not need a formal legal agreement, but you should put the key terms of the loan in writing. These include:

a repayment schedule, including dates, amounts and interest (spreadsheet programs such as Excel include templates that make this easy)
a description of how the money will be used
some explanation of how problems will be resolved if they arise
In a dispute, these documents protect both parties from any attempt to misrepresent the original terms. And if the borrower is unable to repay the debt, the paperwork will help the lender write it off as a non-business bad debt for income-tax purposes. For best results, retain a qualified attorney to represent your interests.
Talk to an expert

If the loan is substantial, or if it’s going to be used for a risky business venture, it’s a good idea to seek the advice of a lawyer or accountant. This will help both parties consider key issues objectively and reach a decision everyone is comfortable with. To save on fees, you may want to prepare a draft agreement yourself and simply ask a professional to review it. Software such as Quicken Family Lawyer can help you draw one up.

For smaller loans, you may not need a formal legal agreement, but you should put the key terms of the loan in writing. These include:

a repayment schedule, including dates, amounts and interest (spreadsheet programs such as Excel include templates that make this easy)
a description of how the money will be used
some explanation of how problems will be resolved if they arise
In a dispute, these documents protect both parties from any attempt to misrepresent the original terms. And if the borrower is unable to repay the debt, the paperwork will help the lender write it off as a non-business bad debt for income-tax purposes. For best results, retain a qualified attorney to represent your interests. If you need an extra few thousand dollars to make a down payment or to purchase a house, or are facing tuition fees or a car purchase, borrowing from a family member may be a good option. Thousands of Americans go this route every year. In fact, the person-to-person loan market, including private mortgages, is $65 billion annually. If you’re thinking of borrowing from or lending to someone near and dear, think through the impact it will have on your relationship first. Be sure to put key terms of the loan in writing and consider getting professional advice if the amount of the loan is substantial.
Family loans are tempting for several reasons:

they usually require less security, or none at all
the interest is often lower, or non-existent
the terms are more flexible
the lender is less likely to require a detailed business plan
If you’re the borrower
It’s convenient to get a family loan. But, if things go sour, relationships can suffer. Even though the Bank of Mom and Dad is the lender, you should treat the loan just as seriously as if it were an arm’s-length transaction.

If you’re the lender

You need to avoid putting your own financial future at risk. As a general rule, don’t lend more than you can afford to lose — there’s always the possibility you won’t be paid back. It’s OK to say no. Refusing a family member’s request for money now won’t be as painful as dealing with payment problems in the future.

Take an interest

There are tax implications for certain person-to-person loans. As always, you should check with a tax consultant to determine the requirements in your situation. However, as a general rule, there are no tax implications for either party for loans under $10,000. But you may be required to charge interest on loans of more than $10,000. And with interest-bearing loans — even if the rate is very low — the lender must declare the interest as taxable income. If the borrower is using the money for business purposes, he can generally deduct the interest when calculating profit.

Get it in writing

For smaller loans, you may not need a formal legal agreement, but you should put the key terms of the loan in writing. These include:

a repayment schedule, including dates, amounts and interest (spreadsheet programs such as Excel include templates that make this easy)
a description of how the money will be used
some explanation of how problems will be resolved if they arise
In a dispute, these documents protect both parties from any attempt to misrepresent the original terms. And if the borrower is unable to repay the debt, the paperwork will help the lender write it off as a non-business bad debt for income-tax purposes. For best results, retain a qualified attorney to represent your interests.

Talk to an expert

If the loan is substantial, or if it’s going to be used for a risky business venture, it’s a good idea to seek the advice of a lawyer or accountant. This will help both parties consider key issues objectively and reach a decision everyone is comfortable with. To save on fees, you may want to prepare a draft agreement yourself and simply ask a professional to review it. Software such as Quicken Family Lawyer can help you draw one up.

For smaller loans, you may not need a formal legal agreement, but you should put the key terms of the loan in writing. These include:

a repayment schedule, including dates, amounts and interest (spreadsheet programs such as Excel include templates that make this easy)
a description of how the money will be used
some explanation of how problems will be resolved if they arise
In a dispute, these documents protect both parties from any attempt to misrepresent the original terms. And if the borrower is unable to repay the debt, the paperwork will help the lender write it off as a non-business bad debt for income-tax purposes. For best results, retain a qualified attorney to represent your interests.

Key Provisions in Loan Marketing and Servicing Agreements

Lets say you want to apply for a loan, be it for a house, a car, or to pay for school. Very often, the company you deal with, either through the car dealership, the mortgage company, or your school is not the bank that is actually processing the loan. Rather, banks like to hire marketing and servicing companies to, as the name would suggest, market and service loans. This includes advertising the loan product, printing out loan applications, and receiving loan payments. The bank, however, is still making all decisions regarding the loans, such whether or not you are approved, and if so, what the terms and conditions of the loan may be. Let’s take a closer look at a typical Loan Marketing and Servicing Agreement between a marketing and servicing company, whom we shall creatively call Marketing and Servicing, Inc., and a Bank.

The first provision of such an agreement will state clearly and unequivocally that the
Bank shall make all decisions regarding the loans. At no time shall Marketing and Servicing, Inc. (“servicer”) imply or suggest that the loans are made or approved by servicer or that servicer can improve an applicant’s prospect of obtaining a loan. At the same time, the agreement could also provide Marketing and Servicing, Inc. a “right to purchase” any loan the Bank wishes to divest itself from. If this is the case, then if Bank wishes to sell or transfer any Loan to a third party, Marketing and Servicing, Inc. may wish to reserve a right of first refusal to purchase, receive or participate in the loans.

The second provision will want to cover Marketing and Servicing, Inc.’s general duties. This provision should authorize Marketing and Servicing, Inc. to act as the fiscal agent for the bank, and to establish retail stores where loan applicants may submit loan applications and where borrowers may execute and deliver loan documentation and repay loans. The agreement is thus creating a traditional “agency” relationship between the Bank, the principal, and Marketing and Servicing, Inc., the agent, who is given explicit authority to act on behalf of the bank in respect to certain functions.

The next provision will cover Marketing and Servicing, Inc.’s duties in respect to the marketing of the loans. The Bank will authorizes Marketing and Servicing, Inc. to market the loans using the name, trade name, and logo of bank in connection with such marketing. Marketing and Servicing, Inc. may also advertise as it sees fit as long as said advertisements appropriately identify bank as the lender. The Bank shall exercise no authority or control over Advance America’s employees or methods of operation, except as set forth in this agreement.

Finally, the agreement must set forth Marketing and Servicing, Inc.’s duties in respect to servicing of the loan applications. Again, the bank will be responsible for making the final determinations regarding loans, and Marketing and Servicing, Inc. will be the middleman receiving and processing all loan applications. If applicable, Marketing and Servicing, Inc. may also provide collection services to the bank and shall make all reasonable efforts to collect on unpaid loans.

These would be the typical provisions found in a Loan Marketing and Servicing Agreement. Hopefully, this article has shed some light on how this common arrangement works in practice.

The Best Car Insurance Rates

If your car insurance is due for renewal and you are considering buying another policy then this article will provide you with important facts that you should know about. Car insurance policies are getting increasingly expensive and you should do all that you can to reduce your costs. How much you have to pay for your car insurance is dictated by a variety of factors as they apply to you and your vehicle.

In this article we will examine coverage limits, your age, gender and marital status, your location and insuring other household members. All of these factors will have a great influence on how much you will have to pay for your policy.

Coverage limits are generally dictated by the price that you are willing to pay for your insurance. A higher level of coverage will generally result in higher premiums. The best way to find a good value policy is to comparison shop. Nowadays it is generally accepted that the best way to do this is by using a car insurance comparison website.

Your age, gender and marital status will have a great effect on the auto insurance rates that you are offered. Insurers rate drivers using a variety of criteria, if you are a young single male driver you will usually have to pay higher rates. If you are a middle-aged female married driver then your rates will be lower. Insurers calculate the best car insurance rates for you by comparing levels of risk. Those groups which are statistically more likely to be involved in an accident have to pay correspondingly higher rates.

Location plays an important part in deciding how much your premiums will cost. Drivers who live in an urban environment will usually pay more than those from a rural area. This is because drivers who live in cities and heavily populated areas are more likely to be involved in an accident, or to have their car stolen or vandalized. Insurers generally offer better rates if you’re able to demonstrate that you keep your vehicle in a garage at night. You may also be able to improve the security arrangements of your automobile by fitting an alarm, immobilizer and steering wheel lock.

Insuring other household members will have an influence on the cost of your policy and the best car insurance rates that you offered. If you have teenage family members living with you and they are added to your policy, then your costs will increase. This may still work out cheaper than if your teenage driver were to have a separate policy in their own name.

In conclusion, there are a variety of different factors which can affect your ability to be offered the best insurance rates. Some of these are coverage limits, how old you are, whether you are male or female and whether you are married or single. Your rates will also be affected by the area where you live and whether other household members are included in your policy.