Loan Amendment Agreement

A loan amendment agreement changes the terms of the original loan agreements and eliminates or prevents an incipient default. Suppose that the borrower fails to repay the entire principal due on the maturity date of a loan.  In response, the lender could agree simply to give the borrower more time to repay the loan — by amending the loan agreement and promissory note to extend the maturity date to some future date.  By amending the loan agreements in that manner, the lender would effectively eliminate the default and the lender’s rights arising from the default.  Thus the lender would no longer be entitled, for example, to accelerate repayment or to charge a higher, or “default rate” of interest as a remedy for the (now wiped clean) default.  Compare the loan amendment agreement to the Glossary definition of “forbearance agreement.”

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