Loan agreement: private arrangement or arrangement agreed with a bank

A loan contract is a legal contract between the lender and the borrower. The subject of such a contract is a sum of money recorded in the contract.

It is the task of a loan contract to secure both sides, therefore the most important agreements are fixed in writing in a loan contract and confirmed by the signatures of both parties. The contract is usually for direct lending, and there are also loan contracts for indirect lending.

The loan amount and the agreed interest should be recorded

The loan amount and the agreed interest should be recorded

  • the setting of collateral makes sense (e.g. in the form of assignments or transfers of property)
  • important components such as loan amount, term, interest rate, method of repayment, termination modalities and arrears should be specified in the loan contract
  • an acknowledgment of debt certified by the notary about the amount lent makes sense

As a lender, you should only lend money to relatives or friends that you actually don’t need (even over a long period of time).

Such a contract can be drawn up informally on loans. Nevertheless, you should make sure that all important agreements such as loan amount, interest rate, contract term, repayment method, termination modalities and similar things are mentioned in the contract.

Loan agreement between the bank and a borrower

Loan agreement between the bank and a borrower

In addition, the names and contact details of the parties involved should of course be given. Templates for such loan contracts are now available in a wide variety of variants on the Internet. All you have to do is download, fill in and print it out.

For a loan agreement between the bank and a borrower, for example in the context of mortgage lending, the legislature has issued its own legal provisions. In particular, the so-called pre-contractual information obligation on the part of the bank in the context of consumer loan contracts is regulated here.

  • If the bank does not comply with the regulations on the mandatory information requirements, the borrower can revoke the contract or contest it in court.

Overdue expensive forms of money loans.

Between 2012 and 2013, 35% of Dutch households were red at least once, according to figures from the Authority for Consumers and Markets. At the end of last year, the total amount that the Dutch were in the negative was no less than 12 billion USD. Being in the red is actually too easy. You do not have to make any arrangements. For extra financial space, you only need to go over the amount available in your current account. That’s right where the danger lies. Because a negative balance entails high interest costs.

High interest costs are overdrawn

High interest costs are overdrawn

Too many people are unaware of the high interest that must be paid to the bank before overdraft. Interest rates from 11% to almost 14%, the maximum interest that can be charged, are no exceptions. This interest is considerably higher than the average interest you pay for a loan. Because that is temporarily overdrawn on your current account, of course: a form of borrowing money.

Alternative form of money lending

Alternative form of money lending

In short, being overdone is a waste of your money. There are plenty of alternatives, with which you can obtain extra financial space in a responsible and cheaper way. For example, a revolving credit or a personal loan is already available at an interest rate of 4.6%. Of course, the actual interest depends on your personal situation. But that means that compared to up to $ 2,000 overdraft at Litebank you can be almost 10% cheaper.

Avoid standing red

Before taking out a loan, compare different loans and interest costs. That is the beginning of responsible lending. But realize: borrowing money always costs money. Another tip with regard to overdraft is therefore obvious: avoid overdraft. Start keeping a household booklet today. This allows you to detect and cut unnecessarily high expenditure. Are you already in the red? Then try to redeem this amount. Because saving currently yields less than overdraft, you could use your savings to redeem your negative balance and avoid overdraft in the future.