How to Prepare Loan Agreement between Two Parties – Sample Template

A loan agreement is signed between two parties i.e. a lender and borrower. The loan agreement is one of the important legal forms which must be signed by both lender and borrower whenever money is loaned. This form legally binds both the parties under the laws of the country. Legal action could take place if any party fails to comply with the loan’s terms and condition. These type of forms are prepared by the lawyer or the concerned authorities. If you’re here looking for the sample of Loan Agreement between Two Parties then you will find that along with other important information related to the loan agreement.

What is a Loan Agreement?

A loan agreement is a local form or document which is signed by a sender and borrower whenever money is being borrowed. Here, the borrower promises to pay the loan within the specified time limit with a particular amount of interest. As a lender, this document is very useful as it legally enforces the borrower to repay the loan. It’s important for both the parties to sign this legal form in order to avoid the legal problems which may happen in the future.

This agreement clears the pre-defined terms & conditions and gives a sense of security to the lender that money will be back along with some interest. This document also serves as proof that the particular amount of money is being borrowed and the borrower has agreed to repay.

 Why a Loan Agreement is Important?

The answer is clear, why would you give money to anybody without signing a loan agreement?

  • A lot of legal loans related to thefts and cases happen every day due to the lack of understanding among people. An official document has to be signed for every money related transaction.
  • As a lender, it’s your responsibility to protect yourself by signing this agreement. This agreement legally enforces the borrower to repay the loan in a specified time limit along with a specified interest.
  • Not only lender but this agreement is important to a borrower as well because it spells out the details of the loan for his or her records and is handy for keeping track of payments.

Make sure to make a proper loan agreement even if the amount of money is small. It’s important to complete all the legal formalities in order to avoid any legal problems in the future.

What’s Included in a Loan Agreement?

Lender Details & Borrower Details: The details of both lender and a borrower should be there.A Lender and borrower can be either an individual or a corporation.

Amount of Loan: The loan amount is the total amount of money which is being borrowed. Mention the loan interest percentage as well. You also have the option to compound the interest, which means interest will be charged on the principal amount as well as the previously accumulated interest, resulting in a slightly higher interest rate overall.

Method of Payment: The method of payment is how the borrower intends to pay the lender.

Repayment Schedule: The schedule includes how the money will be repaid. Mention whether there is a fixed date to pay the loan or it will be paid in the installment. If installments, then what’s the date for every month or quarter.

Collateral: A Loan Agreement may include collateral. This is a form of security for the lender in the event the borrower is unable to repay them.

Download Loan Agreement between Two Parties Sample Template

Download loan agreement template

 

Conclusion

It’s recommended to sign a proper loan agreement in order to legalize the amount of money that is being borrowed. This simple agreement form would save you from a lot of legal cases & problems. Be a smart person and make sure sign this agreement whenever you’re lending money. Take assistance from the loan agreement between two parties template to see how to prepare it.

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