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If you are in the business of loaning money to people, you need to protect yourself by having a loan contract. This applies to anyone who loans money for any reason whether it is cash or a secured loan like a car loan. The easiest way to do this is by using a loan contract template to create a contract for every loan; however there are some things that you should look for when looking at the various downloads available to make sure you are going to have a contract that you can use.

The most important thing your loan contract template needs to have is a place to list absolutely everyone involved in the loan. This means the lender, the borrower or borrowers, any witnesses and if possible an independent third party such a Notary. There should also be a place for each person listed to sign and date the contract.

There should also be a section that is just for the financial part of the loan. This means it must list the amount of the loan, how much the payments are going to be and when they are due, as well as how much the borrower will have paid once the loan is paid off. It should also have a space to list the annual percentage rate of the loan and in many cases a place that shows the monthly interest rate. In short the contract must leave no doubt as the financial obligations of the loan.

The contract should also have a place that shows very clearly when the loan is to be repaid by as the borrower does not miss a scheduled payment. This and the actual payment schedule are very important as it lets the customer know exactly where they stand at all times within the loan. The contract should also explain in great detail that the borrower is undertaking a financial obligation and they can will held responsible for any violations of the contract.

Sadly it’s a fact that not everyone repays the money they borrow, when this happens your loan contract template should have a section that explains every step that will taken to remedy this situation. It should list details such as how many payments can be missed before the loan is considered in default as well as what legal actions the company will take to recover the balance owed and any additional fees such as legal fees that the borrower will have to pay.

If you are in the business of lending people money, you already understand the risks you are taking. If you use the right type of loan contract template you can create a custom contract for each individual loan that may help you recover your money should the borrower default on their loan.