How to Write a Payment Agreement for a Personal Debt

When you take on a personal debt from a family member or friend, it is important to write a payment agreement that you both can agree upon. Not only is it vital to keep track of the personal debt, it is necessary for legal backup if something should go wrong. Writing a payment agreement for a personal debt is simple.

Instructions

Write a Payment Agreement for a Personal Debt

1

Discuss the total amount, any interest being charged, and the payment time frame with the person making the personal loan. Determine when they would like the amount back, what type of payments they would accept and how frequently the payments should be made. Write a payment agreement before money changes hands.

2

Identify the borrower and the lender at the top of the loan agreement. Include the name and other pertinent information such as address or telephone number. Include the date of the loan. The next line should include the total amount of the debt and when it is supposed to be paid off by.

3

Determine the interest on the loan and write down what the rate is. Write down what each payment should be and when it is due. More information leads to less confusion and less chance of either party feeling cheated or taken advantage of.

4

Include information about what will happen if the debt is not paid on time, or if it is not paid at all. If collateral is being offered, give a detailed description of it as well as when it can be sold to cover the amount of the defaulted debt. If there will be an increase in interest or a flat rate fine for late payments, state what it is clearly and when exactly it will be applied. For example: A fine of $5.00 will be added to the normal payment if not paid within 10 days of the payment due date.

5

Make copies of the finished loan agreement. All parties must sign all the copies of the loan agreements in slots marked with either lender or borrower and the printed names of the two parties involved. Have a witness sign the loan paper at the bottom. Each person involved in the loan and debt agreement should immediately receive a copy of the agreement.