The loan agreement usually appears wherever money is borrowed for any purpose. This document regulates all issues relevant to a given lender and borrower: financing conditions, repayment date, or consequences of arrears in settling the debt. Therefore, it is good to know what such a document looks like and which elements should be given special attention.
Loan agreement – statutory definition
Pursuant to the provisions of the Civil Code, the money lender undertakes to transfer the fixed amount of funds to the user of the property through a loan agreement. These – the user is obliged to return under certain conditions. In other words, if you conclude a loan agreement, the acquired funds will become your property. You will be able to publish them in any way you like. After some time, however, you will have to make an appropriate refund. Debt repayment can be one-off or can be done systematically in agreed parts.
In practice, in order to be able to take out a loan in a safe and profitable way, whether from a private person or a loan company, you should be well prepared for it. The following guide for borrowers will help you with this.
Loan agreement – types and characteristics
You can borrow money from a financial institution or from any private person. It can be a family member, friend, but also a completely foreign private lender. If you decide on a private loan of up to PLN 1,000, the contract that governs it may be oral.
In the case of higher amounts, for evidentiary purposes and to better protect the interests of both parties to the contract, it is already recommended to draw up an appropriate document. However, if you want to use a bank or loan institution loan, regardless of the amount of funding, you will sign a contract in writing or electronically.
Courtesy and payable loans
The loan agreement may be courtesy (free) or payable. The first one can be found mainly in transactions between friends or family members. The second, more common option provides for the remuneration of the lender in the form of, for example, interest or a one-time fee for making funds available.
Paid loans are granted without exception by all banks and loan companies, although it is worth noting that in the non-banking sector there are promotional offers of payday loans for new clients, free of any fees.
Importantly, neither banks nor loan companies have full freedom in determining the cost of using their products. They must comply with applicable regulations, i.e. restrictions related to the maximum amount of interest or penalty fees for late repayment.
Private loans and the tax on civil law transactions
A private loan agreement, even if it does not involve interest, is not always completely free. This is due to the fact that its conclusion is a civil law act. In turn, this, in principle, is subject to the payment of tax of 2% of the value of the borrowed amount. Such a tax liability may be a significant burden in the case of larger sums of financing. While at the amount of PLN 2,000 it will be relatively small and will amount to only PLN 40, while borrowing privately PLN 20,000, you have to reckon with an additional cost of PLN 400.
The exceptions are loans granted by related persons – spouses, siblings, descendants, ascendants, and even stepmother or stepfather. Such transactions are subject to tax exemption. It can be used provided that the PCC declaration is submitted to the office and the impact of the loan on the bank account is documented.
Types of loan agreements – the loan is uneven
The structure of the loan agreement varies depending on the type of financial product as well as the details of the offer. Banks and loan companies offer cash loans that range from several hundred to several dozen thousand zlotys and have a repayment deadline of several to several dozen months.
Banks provide additional mortgage loans, while the non-bank sector: short-term payday loans and revolving loans (similar to the credit limit).
Due to this diversity of loan instruments and the large number of financial institutions, individual loan agreements may differ significantly. On the other hand, each of them is prepared according to a similar scheme and should contain a specific set of elements.
What does a correctly drawn up loan agreement look like?
Regardless of which loan product you are talking about, a properly drawn up loan agreement should contain such elements as:
- date and place of the loan agreement;
- indication of parties to the contract;
- loan amount and currency;
- conditions for repayment of the loan and its costs;
- determining any repayment security;
- costs related to the loan;
- rules for possible extension of the repayment date;
- consequences of non-payment or late payment;
- conditions for terminating the contract;
- signatures of the parties to the contract.
What provisions should be included in the loan agreement?
A lot of finance terms (e.g. APY, reference rate) appear in the loan agreement, the meaning of which may be unclear to some customers. It is good, therefore, if the financial institution also includes a glossary in the document, explaining the essence of all difficult terms.
Loan amount and currency
The loan agreement must include a digital and verbal record of the loan amount and currency. If its subject is a sum expressed in a foreign currency, the beneficiary can, in principle, refund it in the Polish currency. An exception is the situation when the necessity to meet a benefit in a specific foreign currency is imposed by: an act, court order constituting the source of the liability or the loan agreement itself.
Loan return conditions
The loan agreement includes specific installment payment dates and / or the full repayment date. The agreement may assume that the funds should be returned with interest, in installments, or in a currency other than the currency of the loan. It may also indicate the place of performance or the method of repayment (in cash or by bank transfer). In addition, it should also specify whether in the event of early repayment the borrower will be entitled to reimbursement for the unused period.
Determining any repayment security
Payday loans and other small loans do not provide any collateral for the repayment of the liability. In the case of larger amounts of financing, it is usually different and the lender can expect: a pledge on things, a guarantee, voluntary submission to enforcement, a promissory note, insurance or establishing a mortgage on the property (mortgage agreement). Regardless of the product, the form of security required should be clearly indicated in the contract.
Costs related to the loan
Particular attention should be paid to the part of the contract devoted to the cost of the loan. It should clearly specify how much you will pay for borrowing money and what will be included in the cost of such a transaction. Importantly, all fees and commissions occurring here must be added up and presented in the form of the actual annual interest rate (APRC). This parameter shows the total cost of the loan in percentage and allows you to easily compare it with other market offers.
Rules for a possible extension of the repayment date
A good loan agreement also indicates the rules on which the repayment date may be postponed. The lender determines the amount of the possible fee for such an activity, as well as if he is willing to extend the refund deadline and how many times you can use such a solution. Remember that even if the contract lacks such a point, and you are struggling with financial difficulties, you can always communicate with the financial institution and ask to change the terms of debt repayment.
Consequences of non-payment or late payment
In each loan agreement you will also find provisions specifying what will happen if you are late with the payment or completely abandon the repayment of the debt. In this part you will learn which solutions the lender will use in this case and how much you will have to pay for them. This is usually about penalty interest for late payment and fees for prompts. If you ignore the request for payment, the consequences may already be more severe.
Terms of termination
Termination of the contract can be carried out immediately, daily or weekly. The document defines the situations in which you and the lender can use this solution. The latter decides to terminate the contract if, for example, you provide false income data. It can do the same if you do not pay back the specified number of installments on time. Regardless of the reasons for terminating the contract, you will always be obliged to return the entire outstanding amount.