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Debt Agreement Review

Updated: March 28, 2023
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A debt agreement review involves inspecting all terms, conditions, rules, and obligations in a legally binding contract between a creditor and a debtor. The review is intended to analyze whether the clauses in the agreement are fair and benefit both parties involved. The best part about a debt agreement review is that it ensures no important information is left out in the document and helps prevent future legal complications.

A debt agreement review includes inspecting the following details in the document.

  • The principal amount borrowed from the creditor
  • How is the money going to be used
  • The stipulated deadline within which the money must be repaid
  • The loan fee, interest rate, and annual percentage rate (APR)
  • Collateral amount (if added)
  • The repayment amount, method, and schedule
  • Penalties for missed payments
  • Measures to resolve legal disputes

What is a Debt Agreement?

A debt agreement is a legally binding contract between a creditor and a debtor to settle outstanding debts and set the related terms and conditions. As a part of the obligations included in the agreement, the debtor agrees to pay a percentage of the combined debt in installments over the year. At times, the creditor may agree to settle at a reduced final figure than the total amount due to the debtor. All such clauses get specified on the debt agreement signed by both parties, which are also enforceable by law.

What Are the Significant Clauses that a Debt Agreement Review Must Cover?

Individuals or organizations must review a few specific things in a debt agreement before signing it. They may withdraw from signing the agreement if they are not comfortable with any of the listed clauses or conditions.

Here is a list of significant clauses that a debt agreement review must cover.

  • Acceptable Uses

    The debtors must ensure they can use the loan amount for their intended purposes. At times, creditors may lend the money for a purpose that may not fulfill the debtor’s requirement. So, it is advisable to review whether it is a flexible loan.

  • Interest Rate

    An interest rate is a cost a debtor will pay every year after borrowing money from the creditor. However, it does not reflect the fees or charges a debtor may have to pay for the loan. Debtors should settle at a low-interest rate to make the loan less expensive. The interest rate is one of the most significant clauses that should get covered under the debt agreement review.

  • Fees

    Most creditors charge additional fees from the borrowers to cover parts of their costs. That is why the amount a borrower pays in fees varies from one person to another. Individuals conducting the debt agreement review must analyze this clause to ensure both parties agree to the fee amount decided against the loan.

  • Annual Percentage Rate (APR)

    A debt agreement review must pay close attention to the APR offered by a specific creditor. The APR is the best resort to inform the borrower about the total annual cost of the borrowed amount. It includes interest and the fees for taking the loan. So, reviewing an APR will help compare the cost of loans from different creditors and choose the one that best suits the borrower.

  • Collateral

    Most loans require individuals and organizations to put up collateral. It is something of value that a debtor promises to the creditor if they fail to make payments on time. A debt agreement review analyzes the assets at stake if a debtor fails to repay the loan amount. It also inspects the minimum value of the collateral, the assets used, and the tenure of missed payment, after which the creditor can take the collateral.

  • Repayment Conditions

    The debt agreement review also covers the repayment conditions that specify the consequences a debtor has to face if the person fails to repay the loan in time. Understanding the repayment conditions through the debt agreement review will make it easier for the debtors to repay their loan amount correctly and on time.

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What Are the Things to Keep in Mind During a Debt Agreement Review?

Debt agreements are a significant part of borrowing money from a creditor. Since the agreements protect the rights and interests of both parties, a reviewer must be cautious when analyzing the documents.

Here is a list of things to remember during a debt agreement review.

  • Ensure that the identities of both parties are specified in the debt agreement.
  • Check if the date of the agreement is included in the document.
  • Check the interest and annual percentage rates to ensure they are according to the state or federal law limits.
  • Analyze whether the terms and conditions serve the interest of both parties.
  • Check for how the debtor can repay the loan to the creditor.
  • Inspect the default clauses and conditions mentioned in the debt agreement.

Key Terms Related to a Debt Agreement Review

Both creditors and debtors must understand the key terms of a debt agreement review to ensure they do not miss out on important details or errors.

Here is a glossary of terms related to a debt agreement review.

  • Arrear: It is a debt or payment that a debtor does not pay by the due date.
  • Asset: It is something that holds value for a person.
  • Bankruptcy: It is a settlement of debts for debtors who are partially or wholly unable to repay their debts.
  • Consolidation Loan: It is a new, single loan combines more than one outstanding debt.
  • Debt Agreement: It is a document records the terms and conditions agreed upon between a creditor and a debtor.
  • Contract: It is an agreement signed between two or more parties for different purposes.
  • Creditor: This is the individual to whom a debtor owes money.
  • Debtor: This is the individual who borrows money from a creditor.
  • Interest Rate: It is the amount charged above the principal amount by the creditor from the debtor.


Debt agreements are legally binding contracts signed between creditors and debtors that are enforceable by law. Since the clauses included in the agreement are complex, it is advisable to review the debt agreement before the parties sign the document. The best resort here is to approach a legal lawyer to conduct the review to ensure all details are included in the agreement leaving no scope for errors or discrepancies.

If you are looking for a professional lawyer to help you with your debt agreement review, visit ContractsCounsel now. You can state all your requirements by posting a project on the official website and getting legal assistance quickly.

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