Personal Loan Agreement

A personal loan agreement can be an excellent way to formalize a deal made between you and a family member or a friend if you’ve borrowed some money and you want to reassure them that you’re really going to pay it back.

Perhaps you want to lend money to a friend, but you need a little security to reassure yourself that your friend will do his or her best to pay it back.

A quick search on any search engine will show you plenty of downloadable personal loan agreement forms, so be sure you find one that suits the arrangement you want to make.

Here are some things to think about if you’re going to fill in a personal loan agreement form.

Promissory Note

If you’re loaning money to someone and you just want the same amount of money back that you lent them, then you might opt for a promissory note form of personal loan agreement.

This is a signed agreement where the borrower offers an unconditional promise to repay the money borrowed back to the lender. You may decide to allow the borrower to simply repay the funds whenever he can afford it or you could agree on a set amount of money as monthly repayments until a date that you both agree on.

Remember to put in a firm date by when you need the money repaid to help keep the borrower on track.

No Interest Personal Loan Agreement

If you don’t want the friend or family member to pay any interest on the money they borrowed, then include this in your agreement. The remainder of the personal loan agreement should still contain all other relevant information regarding how and when the money should be repaid. This includes any payment arrangements or monthly payments.

Charging Interest

You may decide to charge a small amount of interest on the money you’re lending out. You might also impose a schedule of late fees if the borrower is late on any of the repayments you’ve agreed on.

Be careful if you do decide to charge interest on any money you lend out as the tax department may decide that collecting interest is a form of income and you may be taxed accordingly.

However, there are ways to get around this requirement by setting up your personal loan agreement in specific ways. Always be sure you check the regulations in your area if you intend to set up a personal loan agreement and charge interest.

Collateral

Some people like to protect themselves against the risk of the borrower filing for bankruptcy. In this event, money is paid first for any secured loans.

For a smaller personal loan agreement, you might decide to use tangible goods for collateral. Items like jewelry, electronic equipment or other similar items would be acceptable.

Once again, if you’re going to fill in a personal loan agreement to formalize any money you want to lend out, then be sure you’re completing the terms correctly before you sign them.

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Personal Loan Agreement

free personal loan agreement

Personal Loan Agreement

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