OPTION FOR BUYER TO OBTAIN LOAN,
Option of buyer to obtain a loan
The option of the buyer to obtain a loan is necessary so that this allows the buyer whose details are mentioned in the agreement to secure a loan and this loan which is secured will be for an amount which is stipulated as per the terms of the contract. This loan principal amount is then advanced to the buyer on condition that interest will be charged on the principal amount. The details of the capping of the interest too is mentioned, beyond which percentage no extra interest percentage can be charged. This is useful for purchasing property which is mentioned in the agreement.
As per the terms of the agreement, it also states that the buyer as well needs to secure the loan covenant and that the amount will be part of the consideration for this loan option and incase the loan cannot be processed, or the loan cannot be obtained, then the downpayment will be refunded.
The option of the buyer to obtain a loan is needed by buyers who do not have the money to pay for the property in cash or do not have sufficient funds to finance the entire amount by themselves. They thus ask for financing from financial institutions who loan them the amount. However, the amount is only to be used for buying of property and cannot be used for any other purpose. The buyer in these cases also needs to show proof that he or she will be buying the property.
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