Loan Agreement

How to set up a loan agreement

The Civil Code regulates in paragraphs 488 and following the legal basis for a loan agreement and its contents.
Such a contract is concluded when the lender undertakes to make available to the lender a sum of money of a certain amount.

Contracts involving a private loan must be in writing. The written form is also satisfied if the contracting parties declare the request and the acceptance separately in writing.

A loan agreement must first comply with the following formal requirements:

A loan agreement must first comply with the following formal requirements:

► The amount of the loan must be stated as a net amount, ie without the interest to be paid by the borrower and any discount.

► In addition to the amount of the interest rate, it must be determined in which period the interest payment takes place. Usually this can be quarter, half, or all year round.

► If, at the end of the contract, the loan amount is repaid in full, including the interest due, the amount and period of the installment payments must be repaid
(Repayment installments).

Notice period

If no notice period is agreed, it must be determined when the loan must be repaid. The Borrower has the right to make pre-payment payments that are credited to interest and principal.
If a period of notice is agreed, eg one month or three months, the borrower must repay the interest accrued until then.
(If a variable interest rate is agreed, the borrower may terminate the contract at any time subject to a notice period of three months, which is unlikely to occur in the case of personal loans.)


To hedge the lender, it makes sense to make agreements about any collateral. The granting of the security can take different forms. Conceivable is the transfer of ownership of objects (car, furniture, valuables), the assignment of claims and a mortgage , which, however, in private loans a considerable effort, since this must be made in the land registry.

In a final point of the contract, it should be noted that there are no verbal collateral agreements, and that changes and additions to the written form require. Furthermore, the place of jurisdiction and place of fulfillment of the contract should be stated explicitly.