What Is a Payment Schedule?
A payment schedule, in the widest context, is plainly a list of when you need to make certain payments for a certain period of time. It displays the dates of your payments individually together with the corresponding amount; however, it does not show a breakdown of your payment.
How to Create a Good Payment Schedule
You cannot fully make a payment schedule if the legal contract is not yet approved. However, there are a lot of instances where you can make a payment schedule like when you placed an order and it needs a down payment, when there is already an approval of a purchase order, when the order has been received, or in a specific period of time after the order has been received. Whether you want to make a loan payment schedule, monthly payment schedule, construction payment schedule, or payment plan schedule, here are some useful techniques and guidelines in making an effective payment schedule from scratch.
1. Choose a Relevant Format
A payment schedule is a significant document; hence, it has to be written professionally. Thus, in making your legal document, ensure that the font that you will use is appropriate to the function of the paper that you are crafting—in this case, formal-looking, and not for promotional marketing tools like posters and flyers. There is no need to use borders, frames, and vibrant color schemes; black is enough.
2. Determine the Parties
Ensure to distinguish the parties involve—the one who borrows money and the one who is creating the loan; in other words, include a loan agreement because a loan will not be valid if there is no agreement between both parties. Also, include the date when the agreement was made and make sure that all of the parties involved have signed it.
3. Identify the Amount and the Interest
Never forget to put the amount of the loan and its interest rate, that should always be one of the top priorities. The interest should be set at a maximum rate that you can charge; however, if you wish to change the interest, you should base it according to the laws of your state. In that case, it is legal and has a strong basis.
4. Explain the Terms
Your document should include a clear explanation of the payment schedule with the date when the loan should be fully paid. For reference, you can also include a list of your monthly payment due dates. Moreover, make sure that you have listed the days of the payments and the amount that should be paid by the borrower clearly on your simple schedule. There are a lot of instances that the borrower is able to pay the loan earlier as expected; in that case, you can give him the right for prepayment. In contrast to what has been said, if the borrower is not able to pay on time—in other words, late—you can charge for a penalty or additional interest, but you should certainly explain and calculate it to him/her. Furthermore, if there is an occurring default, or when the borrower will not follow the terms—for example, he/she missed a payment—the lender has the right to announce a default.
Determine how to alter the agreement because there will be tendencies that you might want to change something in the terms even after it's signed. There should be a comprehensive explanation included that states that what has been in written on the paper is the entire agreement, and that there's no any agreement aside from it, in order to answer or solve some problems if there will be any misunderstandings in the future. Also, you might want to include a "severability clause" and state a governing law to strengthen your agreement and for future use if there will be legal actions taking place as a result of a disagreement.
6. Sign and Include a Notary Block If Necessary
After everything has been signed and done, you can attach or include a notary block under the signature lines, if it is required to sign the agreement in front of a notary public.