The Balloon Loan Agreement is a specialized financing instrument used in the Philippines when borrowers seek more manageable regular payments during the loan term, with a larger final payment at maturity. This structure is particularly useful for businesses with seasonal income, development projects expecting future liquidity events, or situations where initial cash flows are limited but expected to improve. The agreement must comply with Philippine banking regulations, including BSP Circular 1098 and the Truth in Lending Act, requiring specific disclosures and consumer protections. It includes detailed terms covering the loan amount, interest calculations, payment schedules, security arrangements, and specific provisions for the balloon payment. This document type is commonly used in real estate, business expansion, and asset financing scenarios where traditional equal payment structures may not be optimal.
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1. Parties: Identifies and defines the Lender and Borrower with their complete legal names and addresses
2. Background: Explains the context of the loan agreement and the parties' intention to enter into a balloon loan arrangement
3. Definitions: Defines key terms used throughout the agreement, including 'Balloon Payment', 'Regular Installments', 'Interest Rate', and other relevant terms
4. Loan Amount and Purpose: Specifies the principal amount of the loan and its intended use
5. Interest Rate and Calculations: Details the interest rate, calculation method, and effective interest rate as required by Philippine regulations
6. Repayment Terms: Outlines the regular payment schedule and specific terms of the balloon payment, including amount and due date
7. Security and Collateral: Describes any assets or guarantees securing the loan
8. Representations and Warranties: States the parties' representations regarding their capacity and authority to enter into the agreement
9. Events of Default: Lists circumstances that constitute default and their consequences
10. Remedies: Outlines the lender's rights and remedies in case of default
11. Governing Law and Jurisdiction: Specifies Philippine law as governing law and designates jurisdiction for disputes
1. Insurance Requirements: Required when the loan agreement mandates specific insurance coverage for collateral or the borrower
2. Guarantor Provisions: Included when a third-party guarantor is involved in securing the loan
3. Prepayment Terms: Added when early repayment is allowed, specifying any penalties or conditions
4. Assignment and Transfer: Included when either party may need to transfer their rights or obligations
5. Financial Covenants: Required for business loans or when specific financial metrics must be maintained
6. Conditions Precedent: Included when there are specific conditions that must be met before loan disbursement
1. Schedule A - Payment Schedule: Detailed amortization schedule showing regular payments and balloon payment
2. Schedule B - Collateral Description: Detailed description of assets provided as security for the loan
3. Schedule C - Interest Rate Calculation: Detailed breakdown of interest rate calculations and effective annual rate
4. Schedule D - Fees and Charges: Comprehensive list of all applicable fees and charges
5. Appendix 1 - Required Documents: List of documents required for loan processing and compliance
6. Appendix 2 - Disclosure Statement: Truth in Lending Act disclosures as required by Philippine law
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Real Estate
Commercial Property
Manufacturing
Agriculture
Transportation
Construction
Small and Medium Enterprises
Retail
Healthcare
Relevant Teams
Legal
Finance
Compliance
Credit Risk
Corporate Banking
Treasury
Operations
Business Development
Account Management
Risk Assessment
Relevant Roles
Chief Financial Officer
Finance Manager
Credit Risk Officer
Loan Officer
Legal Counsel
Compliance Officer
Business Development Manager
Treasury Manager
Account Manager
Corporate Banking Officer
Risk Assessment Officer
Financial Controller
Credit Analyst
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