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A loan agreement is a formal contract between a lender and a borrower that outlines the terms and conditions of a loan. This agreement serves as a legal document that details the responsibilities and rights of both parties involved in the transaction.
This precedent is a basic loan agreement. Loan transactions can be fairly simple or extremely complex depending on the following:
The agreement can be customised to take into account the peculiarities of each transaction. It is important to include variables based on the different circumstances of individual borrowers.
How to use this document
This document should be read carefully by the parties who are going to sign it. Every party should then sign the Loan Agreement. Individuals should ensure that their signature of the document is witnessed by another adult person (over the age of 18) who is not named in the loan agreement.
Where a company is a party to this agreement they should ensure that the Loan Agreement is signed by two authorised signatories, either two directors or a director and a company secretary. Where a company only has a single director, that person may sign the agreement as the sole director.
Where the Lender has requested that the borrower provide guarantors, those guarantors should also carefully read the entire Loan Agreement and their guarantee obligations, and sign where indicated.
Applicable law
This agreement is subject to the general principles of contract law. It is suitable for individuals and companies who want a simple and straightforward record of their loan obligations it is not suitable for professional lenders such as finance companies and banks that are subject to more stringent consumer protection laws.
If a Lender is a company, and the Loan is being provided to a shareholder of that company, parties should be aware of division 7A of the Income Tax Assessment Act 1936 (Cth) and use an alternative agreement – the Division 7A Loan Agreement.
If in doubt, seek legal advice.
How to modify the template
The document is in Word formats. You can modify all parts of it and reuse it as many times as you like.
