Lending Contract: How Does This Loan Work?

When it comes to lending something of value for free, whether it is a property or machinery, electronics, or even an agricultural machine, it is possible to be secured through the loan agreement.

The lending contract works by borrowing a property that is unique and irreplaceable. That is, two people agree on the free loan of a good and the person who is occupying or holding the good must bear its return. Therefore, lending is a form of loan that consists in temporarily granting an unmeasurable good (which cannot be replaced).

In this way, the person who granted it is still in possession of the property and the recipient will have to return the property later.


How does the lending scheme and this type of loan work?

money loan

The lending scheme works as a lease for a good, but for free. For example, it is like borrowing an apartment without charging the rent for it.

For it to materialize, of course, a contract must be made.

The purpose of the lending agreement is to transfer the rights to use a good (eg a mobile phone) under certain conditions of return, obligation and even termination.

To understand how to make a lending loan , just follow these steps:

  • Define in the lending letter the name of the participants, beneficiaries and author of the loan;
  • Identify the property or assets to be lent (whether real or movable);
  • Establish a return period or situation that configures the extinction of the need to use the good.


Understand lending rules and their advantages

credit loan

Among the lending rules , the full return of the good is the main one.

However, there are some implications in both contractual and economic terms, such as certain sanctions or penalties in case of breach of the agreement .

The lending rules therefore serve to prevent those involved in the contract from being harmed.

For example:

In the event of early termination, it is possible for the beneficiary to file a claim on the loss and damage caused by the absence of the asset during the stipulated period;

In the case of non-return of the good, a type of rent must be paid to the good grantor until the refund is effected. See rent as a penalty and not a lease agreement;

It is strictly mandatory the conservation of the property by the beneficiary, since in its return the property must be in the same or similar conditions of use when it was transferred;

It is not allowed to charge for expenses from the borrowed property. For example, in the case of a vehicle that was loaned for lending and was fined. The fine must be paid by the beneficiary and not by the owner ( lender ) of the vehicle;

In addition, it is not allowed to carry out the lending of assets that do not belong directly to the person in possession. For example, museum curators do not own the works, but sometimes may own them for restoration or the like.

Besides rules, there are also the advantages of lending , its two main ones are:

The loan is free: you will not have to pay any kind of rent, monthly fee or fee to enjoy the property;

Use of the good: as it will not be charged it is possible to do profitable activities or use it as support to improve the financial situation.

In this case, housing in property without having to pay rent or even have a vehicle available.