What is a Loan Document

The loan document is a formal contract that is made between the loan officer who regulates the loan and the loan seeker. The required formalities that go with a loan supply and return is mentioned in the document. Generally, the loan is made in terms of cash but sometimes they might be in the form of security lending as well. These documents are in written form but sometimes even verbal contracts can be made during loan agreements. However, to avoid any type of fraud, it is best advised to formulate a written loan document. There certain guidelines that need to be kept in mind while creating the loan document, these are as follows:

  • The official name of the loan officer and the institution (private or federal bank) as well as the person applying for the loan need to be mentioned clearly in the document.
  • The mode of loan payment should also be clearly mentioned. Most prefer to receive cash but there can be other provisions made.
  • The policy of return needs to be clearly mentioned in the loan document for the individual or organization to return accordingly.
  • The duration of the loan period also must be specified. In case of failure to return the loan on time, there will be certain legal actions that will be taken.
  • The loan can be made in monthly installments or all at once after a certain fee has been charged. These provisions also need to be included.
  • The loan document must also contain details of the security against which the loan has been taken. In case of inability to pay back the loan, this asset will be confiscated.
  • The loan document must clearly state all terms and conditions necessary for the transaction of the loan. This would help the authorities involved to get a clear idea regarding the matter.

Posted in Loan Documents