If you lend another person or a business entity money or offer services without requiring payment upfront, the best way to protect yourself is to have a solid loan agreement.
It’s not advisable to loan anyone money, services or goods without a loan agreement, as you won’t have the assurance that you’ll be paid. You will not be able to take legal action to recoup your money if you don’t have a contract.
A loan agreement’s purpose is to put in detail what’s being loaned, as well as who the borrower is and when the loan will be paid.
A loan agreement must have specific terms and details exactly, as well as what’s expected to be returned.
As soon as the contract been signed, it’s important to have the document notarized by a public notary in UAE in order to ensure trough the legal formalities.
The best way to prepare a solid loan agreement is to contact a lawyer.
The Loan agreements in UAE have to include the basic information to identify parties agreeing to all the terms and conditions.
- Leave a section that describes in detail what or who the borrower is.
- The lender also needs to be identified. In the section of the borrower, including the information of the borrower.
- If the borrower is an individual, include the full legal name.
- For a business borrowing money, you’ll need to include its designation e.g. Inc. or LLC. and complete address.
- In case if there are several borrowers involved, include the details of all of them on the contract.
- As for the lender, also referred to as the holder, it can be a business or person providing money, services, or goods to a borrower as soon as the contract is agreed and signed.
In addition, you need to have a loan guarantor and include his/her details.
A guarantor of a loan is also called a cosigner. The business or individual agrees in paying back the loan should the borrower default. There can be more than one person or business signing as a guarantor to a loan agreement. The guarantor must also agree to the terms that are set forth in an agreement similar to the borrower. The guarantor must also sign the contract.
It is important to include the location and date of the contract signing, as well as the effective date of the contract and the area where legal proceedings can take place.
Specific details of a loan
As soon as information regarding the contracting parties is added to the agreement, the next thing to do is to outline all the specifics which surround a loan. This can include payment information, interest information, and transaction information.
In the section for the transaction, detail the amount to be loaned by the lender as soon as the contract is executed. In the section for loan payment, detail how the amount loaned will be repaid, payment frequency e.g. due on-demand or monthly payment, and details regarding acceptable payment methods e.g. credit card, wire transfer, or cash.
You’ll need to include what you will accept as the form of payment. This is done to have no question on what form of payment is allowed. On the interest section, including information on the interest that’s going to amass in a loan’s lifetime.
You can have a guarantee for a loan. It will be an another section to address the requirement of collateral.
These could be assets that are used as the guarantee included vehicles, real estate, and other valuable goods that will secure the agreement.
We advise you not to sign the agreement without a public notary in Dubai, or anywhere in UAE, as it can verify the signature.