Loan Agreement
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When making a loan, the agreement should be put in writing to protect both the borrower and the lender. This loan agreement covers the essential terms of a loan between the parties.
Available in MS Word. 5 pages.
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This loan agreement between a borrower and a lender covers the basic terms of a loan. Common situations in which a loan agreement is used are, for example, private or personal lending between friends and family members, or lending from a private individual or business. This agreement includes key provisions including loan amount, loan repayment terms, interest rate, prepayment, and acceleration.
Contents
1. Loan Amount
2. Loan Delivery
3. Loan Repayment
4. Interest
5. Method of Payment
6. Late Charge
7. Prepayment
8. Default
9. Acceleration
10. Costs of Collection
11. Waiver
12. Successors and Assigns
13. Joint and Several Liability
14. Amendment
15. Notifications
16. Severability
17. Modification
18. Jurisdiction for Suit
19. Governing Law
How to Use
To customize the loan agreement, do the following:
(1) follow the yellow bracketed instructions and fill in the blanks with information specific to your loan;
(2) review the green highlighted bracketed notes and make any necessary changes;
(3) review the entire document carefully to ensure that its contents are consistent with your loan agreement; and
(4) delete the yellow and green bracketed instructions.
FAQs
What is a loan agreement?
A loan agreement is a contract between a borrower and a lender regarding the lender’s loan and the borrower’s agreement to pay.
Why is a loan agreement important?
Borrowing money is a big commitment regardless of the amount. As such, it is important to protect both parties with a loan agreement in place.
Is there a maximum rate of interest someone can charge for a loan?
Yes. There are usury laws to prevent a lender from charging an unreasonably high rate of interest. The interest rate limit varies from state to state. Check the usury law in your state to ensure that the interest rate does not exceed the usury rate.
I’m lending money to a family member. Do I have to charge interest?
No. You can make an interest-free loan.
What does it mean to “accelerate” a debt?
Acceleration of a debt means that all of the debt, including the full balance and interest, becomes due. A loan agreement’s acceleration clause usually states that the full balance and interest becomes due when the borrower either becomes delinquent or becomes insolvent.
What is “governing law”?
The “governing law” provision allows the parties to agree that a particular state’s laws will be used to interpret the agreement, even if they live in or sign the agreement in a different state.
Does the loan agreement have to be notarized?
There is no legal requirement that the loan agreement be notarized. However, it is often a good idea to have it notarized to avoid any legal issues, such as the borrower later claiming that he did not voluntarily sign the agreement.
What’s the difference between a loan agreement and a promissory note?
A promissory note and a loan agreement both require the borrower to pay back a sum of money by a certain date at a specific interest rate. They are both contractual obligations to pay. However, a loan agreement is more detailed than a promissory note and is usually used for loans of larger amounts.
