How To Lend Money To A Friend Legal – A personal loan agreement is always a good idea whether you are lending money to or borrowing from family or friends. It is a way to ensure that both parties understand the terms of the loan. In addition, personal loan agreements can be affected in court in the event of mistakes such as borrowers not making payments. Here’s what you need to know about drawing up a personal loan agreement.
A personal loan agreement, sometimes called a personal loan agreement, is designed as a legal document to outline the loan repayment terms, which helps borrowers and lenders understand expectations.
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The personal loan agreement may also specify whether the agreement includes collateral. While most personal loans are unsecured (ie, no valuable assets are used to secure the loan), these programs may have some security. A secured personal loan agreement should include terms where the lender can request that the asset be used to offset the risk of the loan.
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Most personal loan agreements include information about the borrower and lender, the loan amount, interest rate, fees, repayment terms and schedule, how disputes will be resolved, and the types of borrowers (if any) they will have, loan guarantees.
Personal loans are considered enforceable in court, so defaulting borrowers can take legal action against them, such as liens or wage garnishments.
You typically use a pre-arranged agreement when you sign a personal loan agreement with a traditional lender. If you are borrowing or borrowing from friends and family, you may need to draw up a personal loan agreement.
If there is a small amount, a simple promissory note may suffice. However, in some cases, a more complex agreement may be required. Here are some things to include when entering into a personal loan agreement:
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Although not necessary, it may be wise to have someone else witness the signature (and also sign it) or hire the services of a notary public to handle the registration.
While most personal loan documents are fairly straightforward, some can be more complicated due to additional clauses often found in business or bank loans. Some of the things you might find include:
Although you can write your own agreement from scratch, there are several templates that can make it easier for you to create a personal loan agreement. Here’s an example of how to fill out a template section:
1. Parties: This Personal Loan Agreement (“Agreement”), dated September 19, 2023 (“Effective Date”), is signed by and between Jane Doe (“Wife”), whose mailing address is 123 Main Street, in City of Anytown, State of Delaware, and John Doe (“Financier”), whose mailing address is 123 Any Street, City of Anytown, State of New Jersey.
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2. Loan Amount: The amount loaned by the lender to the Borrower is: One Thousand Dollars (10,000).
3. Payment: This loan agreement, covering the entire principal amount and any accrued interest, shall be due and payable as set forth below:
☐ Lump sum payment: The loan, any unpaid interest and all other fees and charges are due either: Upon Lender’s request / On or before ______/_____/20___
☐ Weekly withdrawals of __________ dollars ($
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X Monthly payments of one hundred eighty two dollars ($188) begin on 10/19/2023 and continue monthly until the entire balance is paid.
☐Quarterly installments of __________dollars ($________) begin on ____ each quarter and continue each quarter until the entire balance is paid.
X This Loan Agreement bears interest at a rate of 4.95 percent (4.95%) compounded annually. This must be equal to or less than the maximum interest rate in the borrower’s state.
☐ There are late payments in this Loan Agreement. If the Borrower fails to pay within __________ days of the due date. Pursuant to this provision, the Borrower agrees to pay the Lender a late fee equal to ________% of the amount due during the missed payment period.
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X The Borrower of this Loan Agreement may repay the loan in full or make additional payments at any time without penalty.
☐ The borrower will charge an additional fee of ________% of the amount paid in addition to the agreed payment schedule.
The Lender has the right to request proof of income from the Borrower. This verification may include, at a minimum, the following:
If any of the following events occur, this will be an “Accelerating Event” under this Loan Agreement:
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9. Acceleration: If one of the above Accelerating Events occurs, the Lenders may, in their sole and exclusive option, terminate this Loan Agreement immediately due and payable.
10. Remediation: The lender reserves the right to remedy any breach of this Loan Agreement. Lender’s delay or waiver in exercising any rights granted under this Agreement shall NOT constitute a waiver of such rights. Further, no waiver, waiver or suspension shall invalidate any of these terms and shall not prevent Lender from enforcing this Agreement. Lenders’ rights and remedies are cumulative and may be exercised individually, consecutively or jointly in their sole discretion.
11. Subrogation: The obligations of the Borrower under this Loan Agreement shall prevail over and be subject to all other obligations, if any, of the Borrower to any unaffiliated third party lender.
12. Waiver: The Lender shall not be deemed to have waived any right granted under this Loan Agreement unless given in writing. This shall not be construed as a future waiver of these rights or any other rights protected by these terms and conditions.
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13. Legal Expenses: In the event that any payment made under this Loan Agreement is not paid when due, the Borrower agrees to pay, in addition to principal and interest, reasonable attorneys’ fees. The amount of such charges may NOT exceed the maximum interest rate in the State of New Jersey on the outstanding balance owed by the Borrower under this Loan Agreement. This amount will be in addition to any other reasonable expenses incurred by the Lender in exercising its rights and remedies in the event of default by the Borrower.
14. Governing Law: This Loan Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey.
15. Successor: This Loan Agreement is binding on the Borrower and the successors, heirs and assigns of the Borrower and the Borrower, however, the Lender may not assign any of their rights or transfer any of its obligations without the prior written consent of the Borrower. written consent of the holder of this agreement.
16. Signature: IN WITNESS WHEREOF, the Borrower has executed this Promissory Note on the date and year first written above.
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The Securities and Exchange Commission (SEC) also has a template you can use to negotiate a personal loan.
No, a personal loan agreement notice is not usually required. However, it is useful to have an “official” record of the contract to encourage both parties to take the terms seriously.
Yes, if all interested parties want to change the contract, they can renew the original contract. However, an agreed procedure should be followed.
In general, the interest rate should be in line with the current market. However, it is limited only by the laws of the country (usually the borrower). You may be charged to the extent permitted by state law.
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A promissory note is often considered a type of loan agreement. However, most promissory notes are simpler than full promissory notes, stating only the amount borrowed and when it must be repaid.
Whenever you borrow or lend money, consider drawing up a loan agreement to protect both parties and clarify the terms, especially when lending money to family and friends. Drafting a personal loan agreement can provide all parties with information and can reduce misunderstandings about loan terms and repayments.
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Free Personal Loan Agreement
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