Loan contract- why is it neccessary?


Loan contract- why is it neccessary?

Having a loan contract can be helpful to both lender and the borrower. The loan agreement between two parties will have complete details about the loan along with the repayment plan. Once the lender approves the borrower’s loan application, a loan contract will be sent, and that has to be read and signed by the borrower.
A loan agreement has various clauses about the loan amount, penalties if any, etc. These days, both loan lenders and borrowers prefer e-loan contract, as it is easy and quick to can help you with many loan lenders, whose loan processes will be entirely online.

A loan contract is beneficial to the borrower in numerous ways, as he can keep an eye on the hidden charges and fluctuations in the interest rates. The consequences of missing the repayment will be clearly mentioned in the contract; this prevents the borrower from being irresponsible.

The loan agreement between the lender and the borrower is bound by the law, and clearly states the responsibilities of each party during the loan period.It includes the various aspects of the loan like the repayment clause, interest rates, default rates, and penalties.It also protects the welfare of both the parties.
A loan contract is necessary for the entire loan period to be predictable, consistent and transparent.

A loan contract reduces irrelevant discussions between the lender and the borrower about various charges and interests; that could erupt in the absence of a contract. In simple words, a loan contract makes the loan process simple and hassle-free.

The lender also has many benefits from a loan contract. He can mention about default interest charges and penalties, in case, the borrower delays the payment. The losses incurred in the market by the lender, will be compensated with these additional charges.