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Formalise Your Loan Agreement With Philipoff Legal!
Loan or Gift Agreement?
Many families help out their brother, sister, son or daughter these days with money towards a deposit for the purchase of a property. If you want everyone to feel comfortable with whether this is a loan or a Gift, Philipoff Legal can assist with providing Professional Loan Agreements. A Loan Agreement is an agreement between a lender and a borrower. This loan is a formal way of setting out the terms and conditions of a loan.
The Lender can be a person, or it can be a company and the borrower can be either too. Because of the freedom to determine when repayments are made, it is also possible for this loan agreement to be used as an at call loan- this means the loaned amount is payable on demand or whenever the lender should decide they want the lent amount back.
A Loan Agreement is an agreement between a Lender and a Borrower. This Loan Agreement is a formal way of setting out the terms and conditions of the loan.
It is vitally important to both the process and the parties involved, that the borrower fully understands the nature of what they are getting into, as to put it simply, the consequences of not repaying the borrowed amount can become very serious, very quickly.
The Lender and the Borrower may not fully understand what they are getting into. With professional loan agreements, then everyone knows it’s a loan and not a gift. This can be extremely helpful if there is a matrimonial split and the loan has not been repaid as yet to the family member who lent the money.
See below for loan agreement details for exactly this type of unique family orientated situation, which can be resolved with the simple employment of one of our talented team members at Philipoff Legal;
Deploying a Loan Agreement addresses the rights of the parties, including:
- The initial amount being borrowed
- How it is repaid
- Any interest payable
- Guarantors
- Right to use the loan to support mortgages, debentures, charges and PPSR registrations.
Loan Agreements are a great way to ensure that you receive the loaned amount back if you happen to be the lender. As opposed to a ‘Gift Agreement’, with little to no ironclad or codified elements, a Loan Agreement is a legally binding document, which guarantees recourse in the event of the break-up of a marriage, or another type of estrangement of friend or family.
Some of the most common clauses found in Loan Agreements include:
- Secure the funds advanced against the assets of the Borrower, usually by the granting of a security interest in favour of the Lender (PPSA Clauses);
- Outline events which lead to the Early Repayment Amount becoming immediately due and payable (Events of Default);
- Provide for a set Repayment Date on which the Borrower must make all payments owing to the Lender, in a manner prescribed by the Lender (Repayment of Secured Money); and
- Set out representations, warranties and covenants made by the Borrower to the Lender (Representations, Warranties and Covenants).
As the arrangement between the parties increases in complexity, it is not uncommon for the Loan Agreement to also include clauses that:
- Enable the advancing of further funds to the Borrower, on the same terms as the initial advance (Loan Facility); and
- Provide a variable interest rate that is triggered in the event that the Borrower defaults on their obligations (Payment of Interest).
Despite Loan Agreements being a far greater option for loan-type situations, there are some risks inherent in the process.
Here are some of the more common pitfalls of traditional Loan Agreements;
- The Lender requiring a director, shareholder or beneficiary to provide a guarantee for the Borrower;
- The relationship between the Lender and Borrower giving rise to a presumption that the loan is, in fact, a gift;
- Ambiguity in the Repayment of Secured Sums of Money clauses leading to a claim under the Loan Agreement becoming statute barred; and
- The Lender failing to register any security interest granted under the Loan Agreement on the Personal Property Securities Register within the required times.
Each situation will depend on the negotiating power of each respective party and the rights and obligations that they are able to negotiate.
For any enquiries about the types of loan agreements you are eligible for, or to discuss what Loan Agreement options are available to you, contact Philipoff Legal Today!
The content of this article is not intended to be legal advice and cannot be relied upon as such loans are not suitable for all circumstances. Please contact Philipoff Legal to discuss your situation and we can provide you with advice tailored to your circumstances.”
*Philipoff Legal is an incorporated Legal practice that is associated with Vicki Philipoff Settlements. Legal Practitioner Director Jolene Ashworth, Non-Legal Practitioner Director – Vicki Philipoff
