They are common in the modern world and many people have credit cards. Loans are also inevitable, that is why we go to a bank and request for a loan. Credit is a part of our life. We usually make credit now and then. But before we can actually have a credit, we usually enter first in a credit agreement. This agreement is essential for us to have a credit. A credit application is submitted to the lender, so the lender can decide whether to give us a credit or not. All types of credits have a credit agreement. It is usual in the way of doing business. A promissory note is not enough that a definite agreement should be made. If you are a borrower, you have to have knowledge about credit agreement. In this article, you will be informed about things on credit agreement. It has tips that can help you. You will learn the advantages of credit agreement. You will also learn how to write a credit agreement. You will know its forms. Now, make yourself relaxed and keep on reading.

47+ Sample Credit Agreements

What is a Credit Agreement?

A credit agreement is a binding document of a loan. It is a contract between a borrower and a lender. It gives all the terms that is involved with the loan or credit. It is a prerequisite before borrowers can use the money that they have borrowed from the lender. It is created for all institutional and business loans. It is necessary for all types of loans including personal loans, auto loans, mortgage loans, bank loans, credit cards, and others. Before you can actually have the money that you are going to borrow, you have to enter into this agreement first. This is for the lenders to secure the terms that they want to have regarding your credit. There are different types of credit agreements and usually, you have to fill up first a credit application. The most common type of credit agreement that we have is through credit cards. Just as Credit Agreement Act 75 of 1980 said, that certain transaction for movable goods can be rendered through credit, we use credit cards to purchase goods that we need. It is a lot easier at times and gives us the convenience in times that we lack money. So, a credit agreement is not bad after all. It can help us in times of need.

Forms of Credit

Credits can be introduced in different forms. Here are the common credit facilities:

Overdraft Credit

A business can have credit when it has no funds that can be found in its cash account. It is going to pay all the interests and all the fees according to the amount that it has borrowed.

Credit Line

Credit line can give you the full access to the funds that you need. It has competetive rate and has many priviliges. Many use this type of facility in credit.

Revolving Credit Accounts

This type of credit line agreement has a limit and has no requirements for monthly payments. The interest that has been accrued will be increased to the principal amount of credit.

Term Loans

This is a commercial loan that can finance any investment. The terms in this type of credit are fixed and also the interest rate. One example of this is a short-term loan which has monthly payments. When a loan is longer, it requires a collateral.

Tips on Credit Agreement

If you are new in the credit world, you may have the desire to be acquainted with all the things about it. Here are some practical tips that can help you in making a credit or a credit agreement:

Have a research on credit agreement. One of the most common thing that people do today is to have a research on everything. Information is very accessible on the internet through Google and other search engines. You may want to see a simple credit agreement sample, so you can have a quick understanding about a credit agreeement. You can also gain knowledge through any credit agreement template. Learn the ins and outs on credit by every information you can stumble into on the internet. Not only will you be aware of what you can do when having a credit, you can also become a professional in it.Demand for a credit agreement when having a credit. If a creditor cannot provide credit agreement, do not have a credit with them. You have to be careful on the present time. Only make credit to a creditor that can provide a credit agreement. A credit agreement is more than important because it has the terms on the agreement. Never enter a credit without a credit agreement.Get credit that you can pay. Getting a credit can be addictive. You can purchase as many things as you want. You can be into overspending because of credit. Before you know it, you do not have a means anymore to provide payment to your credit. So remember to get credit only that you can pay. Do not get too much credit because if you will not have the money to pay for it, you can get yourself into trouble. The lender may bring you into court, especially if you will owe them a large amount of money and you cannot pay. So one thing that could be recommended is to limit your amount of credit. You will have no problem to face if ever.Choose the lender. These days, there are so many loan syndicates. So be careful in choosing your lender. These people harass the borrowers to pay. Do not fall in this kind of trap. You must be aware of these things and choose a lender that is legitimate. You will get yourself into trouble if you will encounter these syndicates. They will extract from you a large amount of interest that you cannot give.

Advantages of a Credit Agreement

A credit agreement has certain benefits. You may want to know its advantages so you will be aware of the benefits that you can get from it. Here are the advantages of a credit agreement:

It gives convenience. One of the type of credit that really gives us convenience are credit cards. We do not need to carry cash at all times and we can buy the things that we need. It is also a good resort whenever we come short out of cash. It also gives a fast transaction. You also can have a bargaining power in your purchase, in case a dispute arise. It is so easy to use. Just a swipe and we can instantly have a credit.It is good for emergencies. There are many things in life that sometimes we cannot afford to pay. When we turn to a credit agreement, we can find a solution. It is so useful in any emergency. We can have the money that we need at times that we really do not have any money. All we need to do is to have a credit application and we can apply for the desired credit that we need. Who does not need to get a credit in times of lack of money when emergency comes? So credit is a very good answer.You can have something that you cannot afford. In case you need a laptop and it cost $1000 dollars and you only have a salary of $300 per month, you can purchase it using credit. You do not have enough money yet to buy it, but through credit, it will be possible. This is especially true in credit cards. We can purchase the things we need in advance. Another example is when you want to purchase a house, you can have a loan in the bank to be able to buy the house. So credit is really good. You can buy the things that you cannot afford. It can give a better quality to your life.You can get a better service for the things you purchase on credit. Yes, you have purchased what you buy through credit, but you have purchased it completely. You will not have any problem about things that you buy. If you will buy something in installments, some problem may arise. But by credit, the goods are completely purchased. You do not have to worry about the seller anymore. You just need to be strict in paying your credit.You can buy on any sale that you see. There can be a time when you will pass in a store and you will see that they are on sale. But what if you do not have the cash to buy it? Through a credit card, it will be possible. You can have the opportunity to buy on every sale that you can see. Times when we really want to buy something come, and credit will help us at those times. Sales are good opportinities that should not just pass. We can get hold of it through credit.You can gain a good credit history. Whatever credit agreement you have, whether a revolving credit agreement or a credit card agreement, having a credit can give you a good credit history. The more you are using credit, the better will your credit score will be. You just have to be aware of all the rules in the line of credit agreement. And of course, you have to pay your credit. If you will always do that, not only can you purchase things that you cannot afford, you can have a good credit history that can make you have larger credits in the future.

How to Write a Credit Agreement

Are you a lender? You must present a credit agreement to every borrower that wants to borrow from you. Consider the following simple steps for you to be able to write a credit agreement.

Step1: Know the purpose of the credit agreement.

First, you must understand the purpose of the credit agreement. This will help you decide on the following:

Step 2: Decide if you will lend and tell the borrower.

After having some predetermined thoughts about the credit agreement, tell the borrower that you can lend the money after you have decided on doing it. Ask the borrower with these following questions of creditworthiness:

Step 3: Negotiate about the terms.

The lender and the borrower should talk about the terms that they will have in the agreement. They must agree on the amount of the loan, the interest rate, and the payment schedule. Left nothing undecided before you are going to darft an agreement.

Step 4: Write the credit agreement.

First, title the document. In your Word processor, center the title “Credit Agreement” in bold letters. Then the next thing is the identification of the parties. Address both parties as the “Borrower” and the “Lender”. Put your names in the right category. Include both party’s addresses. Then be specific about the date. Put the date when you have crafted the agreement. After that, state the amount of money that the lender will lend to the borrower. Be clear in writing this. Then state the interest rate, whether you want it per month or per annum. Afterwards, give the repayment schedule. Finally, include a clause about late fees and prepayment. Also, provide a default provision.

Step 5: Finalize the credit agreement.

Add a law provision, a merger clause, and a severability clause. Then insert a signature block for the two parties’ signatures. Provide also a notary block because you may need to notarize the credit agreement. After all these, then your credit agreement is ready.

FAQs

How Can I Get a Credit Card?

To get a credit card, you must apply for a credit card to credit companies and banks. There are banks that instantly give a credit card after opening an account from them. They will just deliver you a credit card after months or a year or so of banking with them.

Making a credit is inevitable. There are things that we need to buy or purchase sometimes and the only solution to our problem is to have credit. Just brace yourself and do not get too much credit on your shoulders. It is addictive and you must not get yourself into trouble when it is time for you to pay. Have credit only that is sufficient for your needs. With that, you will not lose the convenience of having a credit. It can help you rightfully.