5 tough provisions found in finance agreements
TRANSCRIPT
REVIEW FINANCE AGREEMENTS FOR THESE 5
PROVISIONS BEFORE SIGNING
Real Estate Attorney
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BUSINESS WARNING
When it comes to signing a contract, whether it be for real
estate, a loan, a lease, a car, boat or any type of service, most
people will sign a contract with the intention of complying with
its terms.
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They enter into a contract feeling that its provisions would never apply to them, because they have no
intention of defaulting. But in the event of unforeseen circumstances, these terms and
provisions are meant for when one defaults.
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Essentially, this term makes one pay an additional percentage of the loan balance when paying the balance off
in advance of the intended due date. For instance, a 3% prepayment penalty on $100,000 means that a fee of $3000
is owed to the lender. What a waste.
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Having a balloon payment on a loan or promissory note means that the loan may be amortized over a specified time, but the entire balance is due prior
to the loan being fully amortized. Photo Credit: thebasewarehouse.com.au
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A guaranty is a provision. A guarantor is an individual or company that signs an obligation on behalf of another bound to a contract, usually to ensure that the primary
borrower will perform under the contract's terms.Photo Credit: mortgage-providers.com.au
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In the event that the borrower fails to perform a service or make payments, the guarantor will be called upon to make the payments, pay the entire loan balance, or step
in to perform the required service. Photo Credit: mdigroup.com
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Co-makers are basically joint borrowers on an obligation. If one borrower doesn't pay, then the other remains liable for the debt. There are no requirements for a lender to pursue and exhaust all legal remedies against one co-maker before
pursuing the other.
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The lender can pick and choose who to pursue; one or both. It also doesn't matter that one co-maker may get all the benefit of a contract (known as consideration) while the other may have received nothing from the contractual
relationship.
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Negative amortization occurs when there is an increase in the principal loan balance because the
monthly payments are deficient and fail to cover the monthly interest.
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The remaining balance of interest due is added to the principal balance. A provision against negative amortization can be included in a contract and a
default can be declared.Photo Credit: markeddancer7592.jimdo.com
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Since 1990, attorney David Soble has represented lenders, loan servicers, consumers and business
owners in real estate, finance and compliance matters. For over 24 years, he has been involved in
thousands of real estate transactions and has successfully negotiated and saved millions for his
business and consumer clients.
ABOUT THE AUTHOR
www.ProvenResource.com
31800 Northwestern Hwy.Suite 350
Farmington Hills, MI 48334Phone: (888) 789-1715
Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.