Loan Terms Sheet Template

A loan terms sheet is an essential document that outlines the key terms and conditions of a loan agreement. It serves as a preliminary agreement between the lender and the borrower and provides a clear summary of the loan's essential features. This template will guide you through creating a comprehensive loan terms sheet, covering all the necessary details to ensure transparency and clarity in the loan agreement.

1. Loan Details

• Loan Amount: The total amount of money being borrowed. This should be specified clearly, including the currency.
• Purpose of Loan: The reason the loan is being taken out. This could include personal use, business expansion, or debt consolidation.
• Disbursement Date: The date when the loan funds will be made available to the borrower.
• Repayment Period: The length of time over which the borrower will repay the loan, typically expressed in months or years.

2. Interest Rate

• Type of Interest Rate: The interest rate can be fixed or variable. A fixed interest rate remains the same throughout the loan period, while a variable rate may change based on market conditions.
• Interest Rate: The percentage of the loan amount charged as interest. It is crucial to specify whether the rate is annual, monthly, or another period.
• Calculation Method: How interest is calculated, whether on a simple or compound basis, and the frequency of interest accrual.

3. Fees and Charges

• Origination Fee: A fee charged by the lender for processing the loan application. It is usually a percentage of the loan amount.
• Prepayment Penalty: Any penalties for repaying the loan early. Some loans include a fee if the borrower pays off the loan before the end of the term.
• Late Payment Fee: Fees charged if the borrower fails to make payments on time.

4. Repayment Terms

• Payment Schedule: The frequency of payments, which could be monthly, quarterly, or annually. The schedule should outline the due dates for each payment.
• Payment Amount: The amount to be paid in each installment, including both principal and interest.
• Amortization: Details on how the loan is amortized, including whether it is a standard amortization schedule or a customized one.

5. Collateral and Security

• Collateral: Any assets pledged as security for the loan. This could include property, vehicles, or other valuable items.
• Security Interests: The lender's rights to the collateral in case of default. The terms should specify the conditions under which the lender can claim the collateral.

6. Default and Remedies

• Default Definition: What constitutes a default under the loan agreement, such as missed payments or breaches of terms.
• Remedies: The actions the lender can take if the borrower defaults, including legal remedies and enforcement of collateral.

7. Representations and Warranties

• Borrower's Representations: Statements made by the borrower regarding their financial status and ability to repay the loan.
• Lender's Warranties: Assurances provided by the lender about the terms of the loan and their ability to disburse the funds.

8. Governing Law and Jurisdiction

• Governing Law: The legal jurisdiction that governs the loan agreement. This could be based on the location of the lender or borrower.
• Dispute Resolution: Methods for resolving disputes, such as arbitration or mediation.

9. Miscellaneous Provisions

• Amendments: The process for making changes to the loan terms sheet.
• Notices: How formal communications regarding the loan should be delivered between the parties.
• Entire Agreement: A clause stating that the loan terms sheet constitutes the entire agreement between the lender and borrower.

This template provides a structured approach to outlining the critical components of a loan agreement, ensuring that both parties are clear on the terms and conditions before finalizing the loan.