Financial Forms
Personal / Business Loan Agreement
Establish clear terms when lending or borrowing money to ensure you are legally protected and repaid on time.
What Is a Loan Agreement?
A Loan Agreement is a comprehensive written contract between a borrower and a lender that dictates the terms of a loan. It is more formal and detailed than a simple Promissory Note, making it ideal for larger sums of money or business loans. It covers the exact repayment schedule, interest rates, late fees, and what happens if the borrower defaults.
Secured vs. Unsecured Loans
When creating your agreement, you must decide whether the loan will be secured by collateral:
- Secured Loan: The borrower pledges an asset (like a car or property) as collateral. If they default, the lender has the legal right to seize the collateral to recover their money.
- Unsecured Loan: No collateral is provided. The lender relies entirely on the borrower's promise to pay. If they default, the lender must sue them in court to recover the funds.
Terms to Define in Your Contract
Principal Amount: The total sum of money being borrowed.
Interest Rate: The annual percentage rate charged on the loan (Check your state's 'usury laws' to ensure your rate isn't illegally high).
Repayment Schedule: Will it be paid in weekly/monthly installments, or a single lump sum at the end?
Late Fees: Penalties applied if a payment is missed.
Prepayment Penalty: Whether the borrower is penalized for paying off the loan earlier than expected.
Default Definition: What specifically constitutes a breach of the contract.
Draft a Loan Agreement
Protect your financial interests by creating a formal, legally binding loan contract.