What Is a Credit Agreement?
A credit agreement is a contract between lenders, borrowers and agents, which has legal effect. The main contents of the credit agreement include: name of borrower, guarantor, lender, name of agent, amount of loan, term, interest rate, payment method, special requirements of borrower and lender, and handling of default. Credit agreements are usually signed on a special occasion by a formal ceremony. [1]
Credit agreement
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- A credit agreement is a contract between lenders, borrowers and agents, which has legal effect. The main contents of the credit agreement include: name of borrower, guarantor, lender, name of agent, amount of loan, term, interest rate, payment method, special requirements of borrower and lender, and handling of default. Credit agreements are usually signed on a special occasion by a formal ceremony. [1]
- The contents of the terms of the credit agreement mainly include the following points: Monetary terms. At present, international syndicated loans are mainly in US dollars and can be composed of multiple currencies. The currency of intergovernmental loans is generally the currency of the lender country. Interest rate terms. Traditionally, LIBOR or SIBOR rates are used. But in recent years, many international payments have used other interest rates as the base interest rate and increased or decreased. Interest is usually paid once every six months or three months. Conditions for government loans are more favorable, interest rates are low, and interest rates are even exempt. Payment methods for loans are generally instalments. Collection of loan fees. In addition to interest on syndicated loans, various fees are also charged. There are mainly three types: commitment fees, management fees, and agency fees. Loan repayment method. Generally there are three types of repayments: due repayment, installment repayment, and yearly repayment. The credit agreement to some extent clarifies the rights and obligations of creditors and debtors, and guarantees the security of loans of financial institutions.