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How to Write a Friend or Family Personal Loan Agreement

December 7th, 2010 · No Comments · Consumer Debt

by Staff

Asking friends and family members for money is never easy, for you or the person you are asking. You can make it easier if you write an informal personal payment agreement to show your would-be lender that you consider the loan to be a serious debt and and intend to repay the money. Writing the agreement takes little time, but it could be the one thing that persuades the lender (like your parents or a family friend) to loan you money.

Here are 6 easy steps to writing a personal loan agreement:

1. Starting the Document
Write the date at the top of the page. If you are creating an informal personal payment agreement before receiving the loan, fill in the date when you receive the money.

2. Write the Terms of the Loan
State the purpose of the personal payment agreement and the terms for returning the money. For example, if you are borrowing $500 to repair your car and plan to return $100 a week, write it down. You could say “I, John Smith, understand and agree that I owe Mrs. X $500. I agree to pay $100 a week until the loan has been repaid in full.”

3. Date the Document
Sounds like common sense, but it’s easy to overlook it. Repayment of the loan hinges on the date the agreement is created. Select a start and finish date for repaying the money and write it down. Something like “Repayment will begin on the first Friday of December 2010 and be completed on the last Friday of December 2010.”

4. Statement of Agreement
Write “The lender and borrower agree to the above listed terms.” This should be a few lines below the repayment schedule to draw attention to the fact that both people agree.

5. Sign the Document
Without a signature, the agreement will be really tough to enforce. Print the lender and borrower’s names below the agreement statement. Leave space for both to sign the agreement.

6. Record the Document
Go down to the county recorder’s office and record the agreement. The loan will now be protected from either party losing the paperwork and will have the psychological effect of feeling “real”.

Sample Forms can be found here:

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