Financial loans

It is common practice for people to borrow and lend money, whether in the form of an overdraft facility or in the form of a loan. The amounts concerned can be very modest or very high. It is preferable for both borrower and lender to know exactly where they stand. The lender will usually be keen to ensure that he will indeed get his money back, possibly with interest.

 

To create the necessary clarity, it is advisable to draw up a formal loan or overdraft credit agreement which establishes the relationship between the parties and sets out their respective rights and responsibilities. It will be prudent to consider and record the consequences of default or late (re)payment of interest or principal. It may be appropriate to stipulate circumstances under which repayment of the loan can be demanded. There should also be provisions covering potential disagreements: what is the burden of proof, for example?

 

It is also possible to have a loan agreement drawn up as a notarial deed. Such a deed has conclusive evidentiary value between the parties. An additional advantage is that the notarial deed provides what is known as an ‘enforceable document’. If the debtor fails to fulfil his obligations, it is possible to seize the debtor’s property without first having to obtain a court order. The property seized can then be sold immediately. A notarial deed therefore saves the potential costs of protective seizure, court registry fees and attorney fees.

 

To increase the likelihood that the debtor will indeed fulfil all obligations, it is possible to require further security in the form of a third-party guarantee or suretyship, a pledge or a mortgage.

 

Please contact us for further information about the drafting of loan or overdraft credit agreements and the different options of additional security. We shall be pleased to be of assistance.

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