Sample Loan Agreement – Contract for Borrowing Money
These examples of loan agreements are designed to be used with people you know, whether it be friends, family members, or acquaintances. I will provide several samples to choose from which can be tailored to suit your needs. If you are offering a personal loan to someone you know, don’t just assume you’ll be paid back, go ahead and draw up a contract. Not only will the lender be protected, but it will also give some form of protection to the borrower as well. All of the loan agreements provided can be used in conjunction with a loan payment calculator, so you can determine the payments after interest. Simply adjust the terms as needed, so they fit your personal situation.
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Sample Car Loan Contract Agreement
I, John Doe, agree to borrow the sum of $5,000 (five thousand dollars) to my son, James Doe. This loan is for the purchase of a (vehicle year, make, model, VIN).
Interest shall be accrued at the rate of 6% (six percent). Payments will be due on the first day of each month. The length of the loan will be 4 (four) years, with payments of $117.43 (one hundred seventeen dollars and 43 cents) due on the first of each month.
A late fee of $25 (twenty five dollars) will be charged for any payments made after the 5th of each month, unless a both parties agree to, and sign, a written waiver of the late fee prior to the 5th of the month.
Signatures and dates by all parties should be included, notary suggested.
Example of Loan Agreement to Borrow Money from Parents – Monthly Payments, Interest Free
I, Jane Doe, hereby agree to borrow the sum of $500 (five hundred dollars) to my son, John Doe. This sum is being borrowed to John Doe for the purchase of school books, on (today’s date), and is being provided in cash.
John Doe hereby agrees to pay Jane Doe the sum of $50 (fifty dollars) each month, due on the 15th of each month, for the next 5 (five) months. Interest will be waived assuming no payments are late. In the event of late payments, a fee of $10 (ten dollars) will be added to the balance due.
Both parties agree to the terms of this loan and enter the agreement in good faith.
Both parties to sign and date, notarizing suggested.
Borrowing Money from Parents – Onetime Payment
I, John Doe, hereby agree to borrow my daughter, Jane Doe, the sum of $1,000 (one thousand dollars) on (today’s date). Payment has been made my personal check (include check number) from the account of the lender, John Doe.
Jane Doe agrees to pay a lump sum of the full amount to John Doe no later than (specify the specific date payment is due). No interest will be charged on this loan if paid in full by the due date. If the payment is late, an interest rate of 5% (five percent) will be charged each month, on the first of the month, following the due date.
Both parties to sign and date the contract, notarizing is suggested.
Collateral Loan Agreement to Friend (Car Title Loan)
I, John Doe, hereby agree to borrow the sum of $1,500 (one thousand five hundred dollars) to James Anderson. Doe is providing a cashier’s check for the full amount to Anderson at the time of this contract.
Payment will be made in full to Doe by Anderson no later than (specify the date). Payment must be in lump sum form.
Anderson agrees to use his car title as collateral for the loan. The car title is for a (year, make, model, VIN number), which Anderson holds free and clear of any liens. In the even Anderson does not pay back the loan by (specific date), Doe shall take legal ownership of the vehicle listed.
Both parties sign and date, notarizing highly suggested.
Borrowing Money in Exchange for Work or Service
I, John Doe, agree to borrow the sum of $250 (two hundred fifty dollars) to my daughter, Jane Doe. Payment is being made on today’s date in the form of personal check (include check number) from John Doe’s account.
Payments of $50 (fifty dollars) per week, due on Monday of each week, shall be made for the next 5 (five) weeks, beginning (date of first payment) and ending on (date of last payment).
In lieu of payment, Jane Doe shall be given the option of working 5 (five) hours per week at John Doe’s residence, performing cleaning and typical housework. All hours of work performed in lieu of payment must be completed prior to the due date of each monthly payment.
Both parties agree to the terms of this binding contract.
Both parties to sign and date, notarizing is suggested.
Determining Rates of Interest
The easiest way to determine payments is to use a loan payment calculator, which are readily available online. Simply insert the terms for the length of the loan and the interest rate and plug in the numbers. Both parties should agree to the terms prior to the contract being drawn and both should have input on acceptable terms. Obviously, however, the lender is the one assuming the risk, so the lender should be given a legitimate rate of interest for their risk.
Use Caution When Lending Money to Friends and Family Members
Loaning to relatives is tricky. Many families have been torn apart due to money. While it is sometimes the only option a borrower could have, due to bad credit, personal loans like this should be taken seriously. If the borrower has other options to consider, it might be a wise choice to explore them. Cosigner terms are scary for many, so for the lender, this could be a better option than cosigning. It’s truly up to both parties involved to ensure they are comfortable with the transaction and are willing to enter the agreement of free will. Use caution and common sense and you should be just fine.