Publication date: 15.07.2024
Loan agreements: terms and procedure for concluding in Ukraine
Introduction.
Loan agreements are an important component of banking activities that allow individuals and legal entities to obtain financial resources for various purposes. The conclusion of a loan agreement is regulated by the Civil Code of Ukraine and other legal acts that set out the procedure for concluding, terms and conditions of, and requirements to, loan agreements. In this article, we will review the main aspects of loan agreements, including their terms and procedure.
Legal framework
The Civil Code of Ukraine
The Civil Code of Ukraine (the "CCU") is the main legal act governing the conclusion of loan agreements. The CCU sets out general provisions on contracts, rights and obligations of the parties, terms and conditions of contracts and the procedure for their execution.
Law of Ukraine On Banks and Banking Activities
The Law of Ukraine "On Banks and Banking Activities" regulates the lending activities of banks, sets out the requirements for loan agreements and the procedure for their conclusion, and defines the rights and obligations of banks and their customers.
Law of Ukraine "On Consumer Lending"
This law establishes the legal framework for the provision of consumer loans to individuals, regulates the terms and conditions of loan agreements, the rights and obligations of lenders and consumers, and the protection of the rights of consumers of financial services.
Terms of loan agreements
Key terms of the loan agreement
A loan agreement must contain the following key terms and conditions:
- Subject matter of the agreement: determination of the loan amount to be granted by the lender to the borrower.
- Loanterm: determination of the term for which the loan is granted, the start and end dates of the agreement.
- Interest rate: determination of the interest rate for using the loan, the procedure for its calculation and payment.
- Loan disbursementand repayment procedure: terms and procedure for disbursing a loan (in one lump sum or instalments), loan repayment schedule (monthly payments, annuity payments, etc.).
- Security for thefulfilment of obligations: determination of the form of security (pledge, surety, guarantee, etc.) and the terms of its provision.
- Rights and obligations of the parties: defining the rights and obligations of the lender and the borrower.
- Liability of the parties: determination of liability for non-performance or improper performance of obligations under the agreement.
- Dispute Resolution Procedure: the terms and procedure for resolving disputes that may arise in connection with the performance of the agreement.
- Other terms: any other terms that the parties consider necessary to be included in the agreement.
Additional terms and conditions
Depending on the type of loan and the agreements between the parties, the loan agreement may include additional terms and conditions, such as
- Possibility of early repayment of the loan: the procedure and conditions for early repayment of the loan, possible fees or penalties.
- Possibility ofloan prolongation: terms and procedure for extending the loan term.
- Loaninsurance: terms of mandatory or voluntary loan insurance.
- Conditions for changing the interest rate: the procedure for changing the interest rate depending on market conditions or other factors.
The procedure for concluding a loan agreement
1. Applying to the bank
The process of entering into a loan agreement begins with a potential borrower applying to the bank. The borrower submits a loan application in which he or she indicates the required amount, loan term, purpose of the loan and other necessary data.
2. Assessment of the borrower's creditworthiness
The Bank assesses the borrower's creditworthiness, including analysis of his financial position, credit history, income and other factors. For this purpose, the borrower provides the bank with the necessary documents, such as income statement, account statement, property documents, etc.
3. Preparation of the terms of the agreement
Based on the results of the creditworthiness assessment, the bank drafts the terms of the loan agreement. The terms of the agreement are agreed with the borrower and, if necessary, negotiations are held to amend or supplement the terms of the agreement.
4. Signing the loan agreement
After all the terms of the loan agreement are agreed upon, the bank and the borrower sign the agreement. The agreement is signed in two copies - one for each party. After signing the agreement, the borrower receives a copy of the agreement and, if necessary, other supporting documents.
5. Disbursement of the loan
After signing the agreement, the bank provides a loan to the borrower in accordance with the terms of the agreement. The loan may be disbursed in a single instalment or in instalments, depending on the terms of the agreement and the arrangements between the parties.
6. Fulfilment of obligations under the agreement
The borrower is obliged to fulfil its obligations under the loan agreement, including timely payment of interest and repayment of the loan. The Bank monitors the borrower's compliance with the obligations and, if necessary, takes measures to ensure the fulfilment of the agreement.
Rights and obligations of the parties
Lender's rights
- To demand timely repayment of the loan and payment of interest.
- To check the intended use of the loan, if provided for in the agreement.
- To demand additional collateral or early repayment of the loan in case of deterioration of the borrower's financial condition.
- To apply to court to protect their rights in case the borrower fails to fulfil its obligations under the agreement.
Lender's obligations
- Provide a loan on the terms specified in the agreement.
- Provide the borrower with complete and accurate information on the terms of the loan, including the amount of interest rate, fees and other charges.
- Ensure confidentiality of information about the loan and the borrower's financial condition.
Borrower's rights
- To obtain a loan on the terms and conditions specified in the agreement.
- To demand full and accurate information on the terms of the loan.
- To repay the loan ahead of schedule, subject to the terms of the agreement.
- To appeal against the bank's actions in case of violation of his/her rights or the terms of the agreement.
Borrower's obligations
- To pay interest and repay the loan on time in accordance with the terms of the agreement.
- Provide the bank with the necessary information and documents for creditworthiness assessment.
- Use the loan for its intended purpose, if provided for in the agreement.
- Inform the bank of changes in the financial condition that may affect the fulfilment of obligations under the agreement.
Conclusion.
Loan agreements are an important financing instrument for individuals and legal entities, allowing them to fulfil their financial needs and projects. The conclusion of a loan agreement involves a number of stages, from applying to a bank to fulfilling obligations under the agreement. The legal regulation of loan agreements in Ukraine is aimed at ensuring the rights and interests of both parties, as well as at ensuring the stability and reliability of the banking system.
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