Before you lend another person or a business entity money or offer services without requiring payment upfront, it’s important that you know you should have a solid loan agreement that can protect you. It’s not advisable to loan anyone money, services or goods without a loan agreement as you won’t have the assurance that you’ll be paid. You may not also be able to take legal action to recoup your money if you don’t have a contract. A loan agreement’s purpose is to put in detail what’s being loaned, as well as who the borrower is and when the loan will be paid.
A loan agreement must have specific terms which detail exactly what’s given, as well as what’s expected to be returned. As soon as the contract is executed, it’s essential to have the document notarized by a notary public in UAE in order to ensure it is considered legal and valid in the eyes of the law.
To help explain exactly how a solid loan agreement should be broken down, we’ve divided it into several sections so it’s easier for you to comprehend.
Details of the borrower and lender
With loan agreements in UAE, you’d have to include the basic information to identify parties agreeing to all the terms and conditions. Leave a section that details what or who the borrower is. The lender also needs to be identified. In the section of the borrower, including the information of the borrower. For instance, if the borrower is an individual, include the full legal name. For a business borrowing money, you’ll need to include its designation e.g. Inc. or LLC. Also include the full address.
IN the event that there are several borrowers involved, include the details of all of them on the contract. As for the lender, also referred to as the holder, it can be a business or person providing money, services, or goods to a borrower as soon as the contract is agreed and signed.
In addition, there may be a need for another section to include the details of a loan guarantor. A guarantor of a loan is also called a cosigner. The business or individual agrees in paying back the loan should the borrower default. There can be more than one person or business signing as a guarantor to a loan agreement. The guarantor must also agree to the terms that are set forth in an agreement similar to the borrower. The guarantor must also sign the contract.
Do not forget to include the location and date of the contract signing. Also, provide a date for when the contract will become effective and the area where legal proceedings can take place. It’s important to have all the details in the loan agreement as they can prevent a person or business from traveling if there is a dispute on the agreement.
Specific details of a loan
As soon as information regarding the contracting parties is added to the agreement, the next thing to do is outline all the specifics which surround a loan. This can include payment information, interest information, and transaction information. In the section for the transaction, detail the amount to be loaned by the lender as soon as the contract is executed.
In the section for loan payment, detail how the amount loaned will be repaid, payment frequency e.g. due on-demand or monthly payment, and details regarding acceptable payment methods e.g. credit card, wire transfer, or cash. You’ll need to include what you’ll accept as the form of payment in order for it to have no question on what form of payment is allowed.
On the interest section, including information on the interest that’s going to accrue in a loan’s lifetime. If you don’t have plans on charging interest, you don’t have to include the section. If you will be charging a specific interest rate, include details such as the date when interest will begin accruing, as well as whether the interest would be simple or calculated.
Read also: Notary public In UAE: Why Should I Hire One?
Collateral for the loan
You can have the option to require collateral for a loan. Add another section to address the requirement of collateral. Collateral can be an asset that’s used as the guarantee of loan repayment. Assets include vehicles, real estate, and other valuable goods. You’d also have to identify the collateral that’s required in securing the agreement.
Note: don’t sign the agreement without a public notary in Dubai. Having a public notary in UAE undergo notarization of your loan agreement will protect all the contracting parties should a legal dispute arise. A notary public in Dubai or anywhere in UAE can verify the signatures on an agreement. To know more, call us here in Notary Public Dubai today!