Personal Loan Contract
What is a personal loan?
A personal loan is a loan taken for any personal financial need such as a medical emergency, home improvement or simply for travel expenses to finance a long vacation. The best part about a personal loan is that it can be taken for any purpose whatsoever even when it is not covered under specific purposes for which loans are given by financial institutions such as a car loan, home loan, etc. Personal loans also do not require any collateral or security.
Who can give a personal loan?
A personal loan can be given by any financial institution like a bank or even any individual money lender. In fact, one can also take a personal loan from a relative or a friend. The only common feature among all these is that there must be a personal loan contract. No matter who you are taking the loan from or the purpose for which you are taking the loan, there should always be a contract in writing which gives the terms and conditions for the personal loan.
What are the features of a personal loan contract?
A personal loan contract is a pretty simple contract which lays down only the very basic terms of the loan agreement. However, it is always left to the discretion of the parties entering into the agreement to incorporate any special condition that they deem fit. In general, a personal loan contract contains the following points:
- The purpose of the loan.
- The total amount of the loan along with the rate of interest, if any.
- Repayment plans the i.e. number of installments, frequency of payment and amount of each installment.
- Details of the lender and borrower.
- Specific conditions regarding penalty etc. if the loan contract is not followed by either party.