Have you decided to temporarily lend someone your funds or are you seeking a loan yourself? It is worth writing a quality contract that will clearly give the rights and obligations of both parties and in the event of uncertainties or disputes they will have to base their claims. The parties to the loan agreement are called the creditor and the debtor, the essence of this legal relationship is that the creditor gives the debtor the things specified by type, in particular money, and the debtor undertakes to return things of the same type after the agreed time. In principle, any substitutable and replaceable items such as flour, sugar, money, etc. can be borrowed.If an item is borrowed individually, it is a loan agreement that must be free of charge, otherwise it is a rental.
Always insist on a written contract, even if the loan is between family or acquaintances
The law does not require a written form for a loan agreement, so a mere oral agreement on the granting of a loan is also valid. However, in the case of an oral agreement, it is very difficult for both parties to prove that the surrender of money actually took place. These situations can easily be avoided by capturing all legal acts that occur in connection with the loan in writing. The loan agreement should contain the exact amount borrowed, in terms of numbers and words, the repayment term and any contractual interest and penalties in the event of the debtor’s default in repayment.
If a loan contract does not specify a repayment period, this does not invalidate it
Usually, when concluding a loan agreement, the time by which the loan is to be returned is also agreed. If this is not the case, the debtor is obliged to repay the debt on the first day after it has been requested by the creditor. In this case, however, care should be taken to ensure that this obligation becomes statute-barred, since the limitation period begins to run at the same time as it arises – if the creditor does not request the debtor to pay the debt within three years of the contract, its claim will become statute-barred.
In the event of the debtor’s default, the creditor is entitled to statutory default interest
If the debtor fails to pay his debt properly and on time, he is in default and is legally obliged to pay default interest to the creditor. The rules for calculating default interest are governed by Decree No 142/1994, which stipulates that the amount of default interest shall be determined on the basis of the repo rate of the Best Bank valid on the last day of the calendar half year preceding the calendar half year in which the default occurred. the repo rate is increased by seven percentage points.The amount of default interest thus determined shall always be applied in non-business relations and the parties shall not be entitled to negotiate any other amount or other method of determining default interest, whereas in commercial relations this decree shall apply only if the parties have not agreed on other default interest. .
Timely and proper repayment of the loan by the debtor can be insured by the creditor in several hedging ways, even at the same time. The first of these is a contractual penalty which the creditor may mention in the contract if the debtor defaults on his obligation. It is important to remember that in addition to the contractual penalty, the creditor is also entitled to statutory default interest.Another possibility of securing the loan may be the guarantee for the debtor by another person or by entering into a pledge agreement on the debtor’s immovable and movable assets. Securing a commitment through a promissory note is also very popular.
Specific terms and conditions apply to credit agreements and consumer loans
A special type of loan is a consumer loan or a credit agreement. The parties to a consumer credit are always the consumer, ie a person who is not acting in the course of his or her business or other business activity or in the course of the exercise of his profession and a person acting in the course of such activity . Consumer credit may be intended to cover a particular matter, in which case it is necessary to draw it only on that defined matter, or it may be non-purpose and its use may only be at the debtor’s discretion.