Are All Bank Loan Documents the Same?

There are many circumstances under which it is beneficial for individuals and businesses to take bank loans. Bank loans make it possible to make large investments and to leverage a small amount of money into a much larger purchase that is paid off over time.

For most individuals, the largest loan they take will be a mortgage for their home.   Businesses, on the other hand, will borrow money for many reasons from the purchase of commercial real estate to the purchase of equipment necessary to expand a business or effectively serve customers. Regardless of the specific reason for borrowing, it is important to understand the terms of the loan agreement being signed.

The best way to protect your finances and ensure a loan is a good option for you or your company is to have the bank loan documents carefully reviewed by an experienced legal professional. The Irvine, CA business law attorneys at Brown & Charbonneau, LLP can provide you with the legal assistance necessary to make an informed choice before you sign the loan paperwork.

Are All Bank Loan Documents the Same?

Depending upon the type of loan transaction you are entering into, there may be some standard form bank documents. For example, the Real Estate Settlement Procedures Act (RESPA) requires certain disclosures from banks when the lender is granting a mortgage. The Department of Housing and Urban Development indicates that required documents include a mortgage servicing disclosure statement; a good faith estimate of settlement costs; an initial escrow statement and a HUD-1 settlement statement.

Standard forms are used for the HUD-1 and other similar disclosures, so these types of bank loan documents will be in the same general format no matter who your lender is. However, the specific terms laid out on the form are going to vary depending upon the specifics of the loan agreement. For example, interest rates, closing costs and the amount required for escrow vary from loan to loan.

Other bank documents may also vary substantially among different lenders. You and your business may need to complete an initial application to borrow and the applications may ask different questions depending upon whom you are borrowing money from and the purpose of the loan. The actual loan agreement can also vary substantially from lender to lender, although all agreements should contain information on:

• The loan interest rate and annual percentage rate.
• The monthly payment and repayment terms.
• Late fees and penalties for nonpayment.
• Any collateral or security that guarantees the loan.
• The amount of the prepayment penalty, if any.
• The length of the term of the loan.

These are just some of the different things that you should look carefully at when reviewing your bank loan documents. Once you have signed the documents, you will be bound by the terms of the agreement. You should always speak with an experienced Irvine, CA business law professional before signing loan paperwork. Contact Brown & Charbonneau, LLP today to get the advice you need to decide if borrowing money from a specific lender is right for you.