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A Release of Loan Agreement is given to a Borrower by the Lender once the terms of the Loan Agreement are satisfied. This generally means that the Borrower has finished paying the Lender back the amount of money originally lent, plus any accumulated interest, if applicable. This document creates a written record of the release, which the Borrower can keep on file and can use as evidence that the loan has actually been repaid.
How to Use this Document
Prepare the document by including all of the relevant information about the loan and the parties. This includes information such as:
This document may be signed by several Lenders, but it is only designed to be signed by one Borrower. If there were several Borrowers under the original Loan Agreement, prepare a separate copy of this document for each Borrower.
It is good practice to attach a copy of the original Loan Agreement (for the loan that is being released), for reference. This can be marked with a label such as "Attachment A" (which can be printed on the Loan Agreement, or added by hand). Then in this Release of Loan Agreement, we can refer to that original Loan Agreement using that label.
Once the document has been prepared, the parties may sign it.
The parties may each keep a copy of the document for their own records.
It is important to note that the document is structured as a Deed. There are certain formal requirements that need to be met in order for a Deed to be validly signed. This Deed will need to be signed in accordance with those formal requirements, or it may not be legally binding. For example, for an individual to validly sign a Deed, the signature clause should read "Signed Sealed and Delivered" and they should sign it before an independent adult witness, who also provides their full name and signature. The rules regarding the signing of Deeds by companies are set out in the Corporations Act 2001, and generally require the Deed to be signed by two directors, or by a director and the secretary or in the event that the company has a sole director who is also the secretary, by that person.
If the Parties are unsure about this, they should seek legal advice. If the Parties get this wrong, the Deed may not be legally binding.
In some cases, if a loan deals with complex matters, the loan may be deemed a complex financial product and may fall under the Corporations Act 2001 (Commonwealth) meaning that additional legal obligations may apply.
Importantly, if the lender is in the business of providing credit, and if the credit is provided for personal, domestic or household purposes, or for the purpose of purchasing, renovating or improving residential investment property, then the National Consumer Credit Protection Act 2009 (Commonwealth), including the National Credit Code (which can be found at Schedule 1 of that Act) may apply. This may also impose additional legal obligations. Further information is available on the website of the Australian Securities and Investments Commission. If in doubt, seek legal advice. Lenders should review whether the provisions of that Act apply to their lending activities and ensure that they are in compliance with the rules that apply to Australian credit licence holders.
Each state and territory has legislation that addresses the formalities that apply to the signing of deeds by individuals. In addition, the Corporations Act 2001 (Cth) deals with the signing of deeds by companies.
This document is also subject to the general principles of contract law.
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