If you are looking for free loan agreement templates, look no further. Below, you will find a sample loan agreement you can use to help make your own. Most financial advisers suggest that if you need to borrow money for any reason, you either ask your parents or your friends first before you get a loan from any financial institution. However, if you are the person being asked to lend money to a friend, you should always give it a second thought.
It is natural for friends to lend each other money. However, often times, it does not end well for the relationship when one party fails to return the money. If you do not want to find yourself in this type of situation, first ask yourself if the money is really worth ruining your relationship. If you are okay with never seeing the money and just want to help out a friend, then by all means go ahead and provide the loan. However, if you want to save yourself a headache down the road, it is in your best interest to issue a loan agreement right from the start.
Sample Loan Agreement between Friends
This loan agreement was made on February 12, 2015, for $20,000, between Steve Smith, referred to as the LENDER, of V6, Lake Street View LA and Mike Fields, referred to as the BORROWER, of B/11 Green Avenue Park LA.
Take note that the date of agreement and the amount are included as well as the addresses of the parties involved.
In this portion, you need to provide the payment terms and the period given to the other party to repay the borrowed money. You also need to indicate the date of when the money should be paid.
Both the borrower and the lender agree on the following term of payment. As agreed, the money should be paid in a period of six months and it has to be made on the 16th of each month. The first payment will be on April 16, 2015 and on September 16, 2015, the borrower must make the last payment.
The interest rate will be 6%. The total amount to be paid every month will be $3,534. An extra $30 will be paid if the payment is not made on the due date. Payment is acceptable in cash only.
One of the most important parts of the agreement is the signature. Make sure that the borrower and lender both sign the agreement. If you want to take it one step further, you can have the letter notarized by signing the document in the presence of a notary.
Tips on How to Write a Loan Agreement between Family Members
When financial problems arise, family members are perhaps the easiest to approach for help. If you are on good terms with a family member, you may be able to borrow a certain amount of money. However, it is in the best interest of both parties to always sign a formal agreement, in order to prevent any legal headaches that may occur down the road. Although it is easy to ask a family member for help, keep in mind that arguments over money can often times ruin relationships.
What Should I Include in a Loan Agreement?
Very similar to the standard bank promissory note, the loan agreement between family members must include the principal amount borrowed from the lender, the interest rate (usually not applicable) and the repayment terms. The repayment terms can be monthly installments or a lump sum of the amount borrowed.
Nonpayment terms apply when the borrower is not able to pay the amount by the agreed upon due date. Including nonpayment terms in the agreement will definitely help the lender in the event that the borrower fails to pay on time. The different recourses that can be discussed in the letter, includes the modification of loan terms, collateral for cash replacement, additional fees on late payments, and legal action when the agreement is not met by the borrower.
Maintaining a Good Relationship
The best advice about the issue, how to write a loan agreement between family members, is the consideration of relationship between the borrower and the lender. When you are settling for an agreement, make sure that it is a win-win situation for both families. If you are the lender, you may ask for lesser interest than the usual rate or you can lend the money without the interest. If you are the borrower, you must always keep in mind the date that you promised to pay the amount you borrowed.
Apart from writing a flawless letter and following the tips mentioned above, you should always be open to communicating with the other party at all times. This is the best way to maintain a healthy relationship between the borrower and the lender. When you are settling for an agreement, make sure that it is a win-win situation for both sides of the family.
Tips on How to Write a Collateral Loan Agreement Letter
A collateral loan is a loan, which allows the lender to take the asset(s) of the borrower as a replacement for unpaid fees. Examples of items that can be used as collateral include vehicles, cash accounts, investments and real estate. The assets listed can work as collateral because the lender can sell it, and get back his or her money. A collateral loan is a good option, especially if the amount being borrowed is very high.
What do I Include in a Collateral Letter?
The first step in writing a collateral loan agreement letter is to input the names of both the borrower and lender as well as each individual’s home address. Keep in mind that you need to clearly identify who is the borrower and who is the lender. Make sure to include the date at which you created the document.
Amount, Interest and Payment
When writing a collateral loan agreement, it is critical that you clearly write the amount being loaned. Make sure to include the interest if there is any. Apart from stating the amount and the proper interest, you also need to include the payment date as well as the payment method. Make sure to write a clear schedule of when the interest should be applied.
Adding the Collateral to the Letter
When you write the letter, you need to describe the collateral that you are entitled to receive in the event that the borrower is not able to pay by the agreed upon date. You need to include the terms of when the collateral applies. You also need to write the standard clauses such as the choice of law, severability, and other general provisions if necessary.
A collateral loan letter must always have a signature block. This area will require both the borrower and lender to sign the agreement.
Keep in mind that the above information should be used as a guide and not as legal advice. If you need legal advice, please contact a lawyer.