How to Write a Payment Plan

Before you implement any type of deal, you need to get it in writing, and that includes a payment plan arrangement, no matter how informal. Oral agreements are enforceable by law, but it is much more difficult to prove the terms of the agreement in court. When you are setting up a payment arrangement with a friend, colleague or company, be sure to write the agreement in clear language that is understood and accepted by both parties.

Instructions

1

Format your payment plan as either a letter or a contract. For a letter, start off with a greeting and list the name and address of the person who you are making the agreement with at the top. For a contract format, write in the full name or business name of each party at the top of the sheet along with full addresses.

2

Enter information about the debt to be repaid. That includes the amount of the debt, the account number if applicable, the date it was initiated. If this is a request in letter form, state that you have every intention of repaying this debt. Include information about why you need to set up the payment plan (financial issues, job loss, other debts).

3

Set out the proposed payment plan information. Include the length in months of the payment plan, the amount that will be paid each month (or week), and any interest that will be built into the payment agreement. To figure the monthly interest charge, divide the rate by 12 and multiply it by the agreed upon (or proposed) monthly payment. Figure the interest using a compounding formula (setting up the payment plan as a loan) (see Resources).

4

Write in the exact day of the month (or week) that payments will be due. Detail late fees that will be assessed to the payment plan if the payer does not pay on time and the course of action if the payer does not live up to his or her part of the agreement.

5

Include as part of the agreement a condition that the payee will not pursue collections activities or place negative information on the payer's credit report as long as payments are made on time per the payment plan.

6

Have the payment plan signed---both a printed name and signature should be at the bottom of the contract---before a notary and assure that both parties have a copy of the agreement. If this is a contract, both parties should sign, if a payment plan request letter, the requester will be the only signature.