How to Create a Payment Agreement?
A payment agreement is defined as a document that outlines and regulates all terms and conditions involved when one individual makes a loan. Details indicated in a payment agreement include the payment plan, installments, amount to be paid, and the interest rates applied.
Money is no laughing matter and borrowing or lending money should always be documented if necessary. Here, you can learn how you can write a simple yet professional payment agreement letter that can protect both parties from any legal problems.
1. Differentiate contracts from agreements
While both contracts and agreements are closely related, it is still best that you educate yourself by knowing the difference between the two. For starters, an agreement is any document that is used when terms are being settled between parties while a contract is a more specific type of agreement. And while both are considered legal documents, the former does not bind the parties while the latter does.
2. Know the elements in an agreement
An agreement consists of various elements starting with an offer and ending with writing. An offer is the start of an agreement which is a proposal made by one party to be accepted by the other. Writing is the final element in an agreement and while it isn't always required, it can help in enforcing what's being agreed by the parties. Just to be safe, it might be better if you put into writing all your basic agreements.
3. Make your offer
As mentioned in the last step, the offer is the first element in an agreement and will enable you to proceed to the next ones only after being accepted. A good offer is one that involves effective communication between both parties, a commitment to the amount of pay stated, and terms that are definite and specific. As long as these three are present, the offer is considered valid.
4. Write a draft of the content
After you've made a valid offer and it has been accepted by the other party, you can start making a draft of your financial settlement agreement. Here, you can choose to write either in narrative form or bullet points, whichever is easier for you. Of course, your content should be based on what you and the other party have agreed on, be sure to notify them first before making changes.
5. Start encoding your payment agreement
Once you've outlined your payment agreement's content, you can start transferring the content to a document processor. However, it might be better to ask the other party to review the outlined content before doing this. You can choose between MS Word, Apple Pages, or Google Docs to encode your payment agreement, choose whichever is more convenient to you, and save it in a printable format.
6. Review and print your payment agreement
Lastly, review the encoded content and see if there are any grammatical or spelling errors. If so, make the necessary corrections since an agreement can be considered void by any party if errors are present. Also, you might want to check the content if all the relevant details have been included and nothing has been left out. After printing the agreement, you can even have it notarized if you want.