5 tough provisions found in finance agreements

REVIEW FINANCE AGREEMENTS FOR THESE 5

PROVISIONS BEFORE SIGNING

Real Estate Attorney

www.ProvenResource.com

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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http://www.provenresource.com/

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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1. PREPAYMENT PENALTY ("PPP")


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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2. BALLOON PAYMENT



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



3. GUARANTY



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



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



4. CO-MAKER



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.

Photo Credit: alamocitytimes.com



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.

Photo Credit: cincinnatireia.com



5. NEGATIVE AMORTIZATION



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.

Photo Credit: gazprom.com



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



CONCLUSION



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


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.


5 tough provisions found in finance agreements

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