Which Reasons Should Loan Agreements Be Used For? 

Loan agreements generally include interest rate terms, guarantees, value of collateral involved, covenants, terms of interest rate and the duration over which the repayment must be done. The default terms need to be detailed in a clear way in order to avoid possibly action in a Court of law or to avoid confusion.

If there is a default terms of the outstanding debt collection, it needs to specify clearly the expenses involved in debt collection. It is also applicable to parties who use promissory notes. Some other important reasons for using loan agreement in Oklahoma include:

Need for formal process

There is a major financial commitment involved when it comes to borrowing money and this is exactly why there should be a formal process in order to ensure positive outcomes on both sides.

The majority of the terms and conditions are quite basic such as penalties for default, late fees, repayment plan, interest rate that is charged, amount of money borrowed etc. However, there are some other reasons also, why loan contracts are assistive.

Helps prove that a loan was given and not a gift

With a Loan Agreement in place, it can be proven that the money that was taken by the borrower was not a gift but a loan. It could become a problem with the IRS.

This kind of an agreement, especially a personal loan agreement, can be particularly assistive when giving money on loan to a borrower who is a friend or a family member. With contracts of this type, arguments over the terms and conditions can be prevented.

Keeps both sides safe

When there is a loan agreement in place, both sides can stay protected – in case the matter reaches a court of law. It lets the court determine whether the terms and conditions are being satisfied.

In case interest is included in the loan, one side might like to include an amortization table, which can make a proper mention of how the payment of the loan would be done over time and the amount of interest involved in each payment. Whenever you lend or borrow money, there should be a legally binding loan agreement in place.