In the Interest section, you can add information for each interest. If you don`t charge interest, you don`t need to include this section. However, if you are, you must indicate the date on which the interest on the loan is incurred and whether the interest is simple or compound. Simple interest is calculated on unpaid principal, while compound interest is calculated on unpaid principal and all unpaid interest. Another aspect of interest that you need to describe in detail is whether you have a fixed or variable interest rate. A fixed-rate loan means that the interest rate remains the same for the duration of the loan, while a variable-rate loan means that the interest rate may change over time due to certain factors or events. When executing your loan agreement, you may be interested in a notary certifying it notarized once all parties have signed or you want to involve witnesses. The advantage of involving a notary is that it helps prove the validity of the document if it is ever controversial. A witness is an alternative to the notarial deed if you do not have access to a notary. Whenever possible, you should always try to include both.
Once you have the information about the people involved in the credit agreement, you need to describe the particularities surrounding the loan, including transaction information, payment information, and interest rate information. In the transaction section, you indicate the exact amount due to the lender as soon as the contract has been executed. The amount does not include interest incurred during the term of the loan. They also describe in detail what the borrower receives in return for this amount of money he promises to pay to the lender. In the Payment section, you describe how the credit amount is refunded, the frequency of payments (e.g. monthly payments, due on demand, a flat rate, etc.), and information about the payment methods allowed (for example. B cash, credit card, payment instructions, bank transfer, direct debits, etc.). You must contain exactly what you accept as a means of payment, so that there are no questions about the authorized payment methods. Borrowing money, regardless of the amount, is an important obligation, which is why it is important to protect both parties through a credit agreement.
A credit agreement not only describes the terms of the loan, but it also serves as proof that the money, goods or services were not a gift to the borrower. This is important because it prevents someone from trying to get out of the refund by claiming it, but it can also help you make sure it won`t be a problem with the IRS afterwards.