Understanding Your Loan Documents
Navigating loan documents can be complex, especially in private money lending. Here’s a simple guide to help you understand the key components of your loan documents:
1. Loan Agreement
This is the core document outlining the terms of your loan. It includes:- Loan Amount: The total sum you’re borrowing.
- Interest Rate: The cost of borrowing, expressed as a percentage.
- Repayment Schedule: How and when you need to make payments.
2. Promissory Note
The promissory note is your written promise to repay the loan. It details:- Principal: The original amount borrowed.
- Term: The duration of the loan.
- Payment Terms: How often and how much you will pay.
3. Deed of Trust / Mortgage
This document secures the loan with the property:- Collateral: The property used to back the loan.
- Rights and Responsibilities: What happens if you default on the loan, including foreclosure procedures.
4. Disclosure Statements
These provide important information about the loan, including:- Fees: Any additional costs associated with the loan.
- Legal Rights: Your rights and obligations as a borrower.
5. Loan Closing Statement
This document summarizes the financial details of the loan closing:- Final Amount: The total amount due at closing.
- Adjustments: Any adjustments for taxes, insurance, or other costs.
Tips for Reviewing Your Documents
- Read Carefully: Ensure you understand all terms before signing.
- Ask Questions: If anything is unclear, don’t hesitate to ask for clarification.
- Consult a Professional: Consider having a lawyer review the documents to ensure your interests are protected.