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Australian Legal Templates

Loan Agreement

Suitable For Use :NSW, QLD, VIC, WA,NT, ACT

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Simple Loan Agreement for Unsecured Loan.

As a business owner you may well ask “why is a Loan Agreement important?” You will almost certainly want to understand the terms and complexities of your business loan agreement so that you or your legal team can negotiate with the lender to get the best possible deal for you.

Loan Agreement 

Download a  Loan Agreement Template for an agreement between a Lender and a Borrower. This template is a formal way of setting out the terms and conditions of the loan.

The Loan Agreement Template includes:-

  • CONTENTS
  • 1          DEFINITIONS & INTERPRETATION   
  • 1.1 Definitions
  • 1.2 Interpretation
  • 2          Loan
  • 3          Interest
  • 4          Repayment
  • 5          Early repayment
  • 6          Guarantor guarantee and indemnity
  • 7          Costs
  •          GENERAL PROVISIONS 
  • 8.1 Counterparts
  • 8.2 Force majeure
  • 8.3 Further assurance
  • 8.4 Governing law and jurisdiction
  • 8.5 Notices
  • 8.6 Service of notices
  • 8.7 Severability
  • 8.8 Survival  & merger
  • 8.9 Variation
  • 8.10    Waiver
  • 8.11    Warranties and representations
  • 8.12    Whole agreement
  • 1. the initial amount being borrowed
  • 2. how it is repaid
  • 3. any interest payable
  • 4. guarantors

The lender may be a human or a company. The Borrower can be a human or a company.

It is important that the Borrower fully understands the nature of what they are agreement sets out and the consequences of not repaying can be very serious and may be followed by debt collection

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Loan Agreement Template

This precedent is a basic loan agreement. Loan transactions can be fairly simple or extremely complex depending on the following:

  • parties to the transaction;
  • nature of the loan;
  • manner of repayment of the loan amount;
  • type of interest payable; and
  • security to be provided.

The agreement can be customised to take into account the peculiarities of each transaction. It is important to include variables based on the different circumstances of individual borrowers.

Regulation

Be aware of the legislation that either proscribes the type of provisions to be incorporated in these agreements or directly impacts loan transactions in Australia.

  • Consumer credit legislation

Consumer credit law in Australia is governed by the National Consumer Credit Protection Act 2009 (Cth) (NCCP) which includes the National Credit Code (NCC). The NCC applies to credit contracts where:

  • the lender is in the business of providing credit;
  • a charge is made for providing the credit;
  • the debtor is a natural person or strata corporation (a strata corporation is a body made up of owners in a strata scheme and has responsibility for maintaining and repairing the common property and managing the finances of the strata scheme, taking out insurance, administering the by-laws, keeping records and accounts for the strata scheme); and
  • the credit provided is for personal, domestic or household purposes, to purchase, renovate or improve residential property for investment purposes, or to refinance credit previously provided for this purpose.

The NCC does not apply to certain loans including low-cost short-term credit contracts (62 days or less) and certain small value credit transactions.

  • Code of Banking Practice (Banking Code)

Most banks in Australia voluntarily agree to bind themselves to the Banking Code. The Banking Code sets standards of good banking practice to be followed by banks when dealing with individuals and small business customers and their guarantors. The provisions of the Banking Code are enforceable against those banks who bind themselves to its terms.

  • Banking (Foreign Exchange) Regulations 1959 (Cth) (Regulations)

It is important to ensure that any loan agreement relating to a loan made in foreign currency or to be paid in foreign currency is not vulnerable to interpretation as a transaction involving the buying and selling of foreign currency. Otherwise, the agreement will be subject to the Regulations.

  • Personal Property Securities Act 2009 (Cth) (Act)

This Act regulates the provision and registration of personal property securities. (refer to the PPSA Loan Agreement)

This precedent

This precedent sets out the basic terms to be incorporated into a loan agreement. The precedent should be customised for each loan transaction, including:

  • the identity of the lender, creditor and borrower;
  • the nature of the loan;
  • agreed payment terms;
  • interest repayments; and
  • security to be provided, if any.

For the purposes of this precedent, the lender or credit provider is a company. However, the precedent can be customised for use where the lender is an individual. This loan agreement does not take into account the requirements of the NCC and it will need to be amended when drafting a loan agreement that needs to comply with the NCC.

 

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