A personal loan agreement is a binding contract made between private individuals, including family members, friends, colleagues, or even neighbors. This agreement outlines all the details involved in the transaction such as the date of the loan, the length of time to pay it back, and the interest of the loan, if there is any.
Although personal loans are done between closely related people, confusion and hard feelings over a loan are inevitable between friends and family in the long run, especially when one party fails to honor the terms and conditions being agreed upon. That is why a loan agreement is essential even between individuals with personal connections.
On this page is a collection of Loan Agreement Templates that you can download and use to formalize any lending or borrowing transactions you do with your loved ones and friends.
General Personal Loan Agreement
Personal Loan Agreement Template
Free Personal Loan Agreement
Personal Family Loan Agreement Template
Simple Personal Loan Agreement
Basic Terms of a Personal Loan Agreement
A personal loan agreement should be treated with respect as how you treat a bank loan. Just like a standard bank promissory note, a loan agreement with family and friends should include these basic terms. (See our Loan Contract Template.) Here are the most basic elements to add in a loan agreement:
- The principal amount or amount borrowed
- Interest rate, if applicable
- Repayment terms such as monthly installment over a set period of time or a lump sum on a certain date
Types of Recourses in Case of Nonpayment
One of the most important things to consider when borrowing with a friend or family member is what will happen when you can’t pay. The loan agreement should clearly state the lending party’s alternatives in case there are no other means of repayment. Below are some examples:
- Adding additional costs to the loan like giving interests
- Modifying the loan terms, if you are feeling more considerate
- Taking ownership of the collateral or anything the borrower is willing to give up
- Pursuing legal action, which is hopefully not necessary at all
For other loan templates, such as the Loan Application Template, feel free to browse our extensive collection of forms on the website and find what you are exactly looking for!
Personal Loan Repayment Agreement
Personal Car Loan Agreement Template
Blank Personal Loan Application Form
Personal Guarantee Loan Agreement
Why Is a Personal Loan Agreement Vital?
- Avoid conflicts. Dealing with money with someone close to you should be done carefully so as not to dampen or destroy a relationship when the borrower neglects his responsibility and fails to pay back.
- Prevents confusion. No matter who is doing the lending or borrowing, a loan agreement should be drafted to clear confusions. It should indicate the loan amount, terms of repayment, or repayment schedule and other charges.
- Promote assurance. Even though you may have known each other for a lifetime, assurance is still needed that the amount will be returned as promised. The fact that you know them does not take away your obligations.
- Protect interests. Borrowing from a loved can provide more flexibility about payment arrangements. However, as the lender, you may also want to protect your interests. This agreement can protect both parties when disagreements happen.
Also, see our Personal Confidentiality Agreement templates.