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Loan Template

How to Write a Loan Agreement?

Lending someone money is a big decision for both the sender and the recipient. So, it should be given a careful thought whether you are the lender or one who needs cash. Furthermore, there may be certain misunderstandings that peek at both parties later. For instance, consider you have given someone loan but he or she considers it as a gift. So when you demand it after a while the other person would be offended. Thus it should be conveyed clearly to the other person that this is a loan which is to be returned at a specified future date.

Furthermore, consider that you have given the loan to a person and both of you have full understanding that this is a loan. But later when the loan is redeemed, you seem offended with the fact that the recipient of the loan has not given any interest or a little bit of cash as interest. There comes the need of a written loan agreement that would prevent these misunderstandings to happen.


Here is how to write a loan agreement:


  • Identification

The very first thing you need in order to write a loan agreement is identification of the parties, i.e. the lender and the borrower. Furthermore, include each party’s contact information as well.

  • Mention The Date

Mention the date at which the loan agreement is entered into, at the top of the document. This step holds a lot of significance as it will be very useful in a legal dispute.

  • Add Terms of the Loan

Write down terms of the loan. You should include purpose of the payment and also terms for repayment. Also, there the agreement should be detailed about security, payment schedule, interest rate and also cancellation policy. The amount should be clearly mentioned in the agreement, both in numbers and words to prevent miscommunication. There should be also a clause relating to late fees.

  • Loan Template Free Download

If you feel that you cannot write the loan agreement yourself, you may avail the loan template free download option as it is easier and simpler.

Furthermore, there are different kinds of templates available for different kinds of loan agreements i.e. a person loan template and a loan template between friends. A loan template between friends is going to be useful when the borrower of your money is your friend. Yes, you need a loan agreement in this case too as you don’t need to end this friendship as a result of this transaction. While a personal loan template is for the same transaction and provides complete protection to both parties.

  • Legal Counsel

You can write the loan agreement with the help of an attorney as well, who would advise you regarding the pros and cons of the agreement. It will also keep you well informed about the legalities and requirements that are mandatory to follow.

  • Promissory Note

You can also issue a promissory note as an alternative for a loan agreement. In this case only borrowet has to sign it.

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