It is important to have a legal agreement when a transaction of money is involved. This is done to protect both the party who is providing the money and the party which is receiving it.
Payment agreements legalize the transaction and its terms. Even in the event that they are not enforceable in a court, they still come as a preventive measure to make sure that there are no disputes.
Here is all about payment agreements and how you can get a payment agreement template suited for your needs.
What is a Payment Agreement?
A payment agreement states that money has been transacted between two parties. The party which is providing the money is generally called the lender and the party which is receiving the money is generally called the borrower.
The primary purpose of a payment agreement is to define the terms for a loan and its repayment. It needs to contain details such as the tenure of the loan, interest rate, amount, and other details that might be important.
Having a payment agreement is important for both the lender and the borrower because it works like an acknowledgement of a loan.
Why Should I Make a Payment Agreement Contract?
A payment agreement is needed whenever money is being loaned by a lender to a borrower. For the lender, it is the proof that the lender has loaned the money to the borrower, detailing the terms and penalties if the lender fails to return the loan.
On the borrower’s side, having the payment agreement ensures that the lender cannot charge unreasonable interest to the loan. It also keeps the borrower’s interests safe as long as they are fulfilling the terms of the agreement.
What Are the Benefits of Using a Payment Agreement?
When it comes to lending money, using payment agreements is beneficial and essential for both parties. It is written in a legalized manner and is evidence proof for loans.
Most people lend money to colleagues, family, and friends without any written declaration of the same. This can result in disputes later on if the borrower fails to repay the money
Signing a payment agreement can eliminate and avoid the chances of a dispute or confusion. It protects both parties’ interests and rights. Once the agreement has been signed, nothing can be revised without both the parties approving.
What can be included in a Payment Agreement?
Here are a few things that are generally present in most payment agreements:
- Legal Names of Lender and Borrower: The payment agreement should contain the details of the lender and the borrower, most importantly their names. Without the legal names of the lender and the borrower, the payment agreement holds no value.
- Loan Acknowledgement: The payment agreement states that the borrower has received a loan of a specific value from the lender. The value of the loan is known as deficiency.
- Total Amount of Money Loaned: It should also contain the amount of money that the lender is lending to the borrower. This is done to make sure that the lender or the borrower cannot make any false claims later.
- Terms of Loan Repayment: It shall detail the terms on which the lender is giving the money to the borrower. The terms of the loan have to be agreed upon by both parties. Therefore, if either party breaches these terms, there can be penalties applicable to them.
- Penalties: : The payment agreement will also contain the penalties that are applicable if either party fails to follow the terms of the payment agreement template. The general scenario for penalties is when the borrower fails to repay the loan on time.
- Payment Timeline: Besides, it should detail the time period of the repayment of the loan, such as when an instalment is due and even the amount of each instalment.
How Can I Make a Payment Agreement?
If you want to get a payment agreement, you can download the free template from CocoSign.
All the payment agreement templates are created by legal experts and suited perfectly for your needs. You can find the payment agreement template that is applicable for your specific case.
You can also get a customized template that is ready to download and sign. Therefore, there is no need for any effort on your end.
If you are a borrower or lender of a loan, signing a payment agreement is vital. Further, you need to make sure that the payment agreement is well-written and detailed. You can also get a free payment agreement template from CocoSign without second thoughts.
I. THE PARTIES. This Payment Installment Agreement (“Agreement”) dated __________________, 20____, is by and between:
Creditor: __________________, with a mailing address of __________________, City of __________________, State of __________________, Zip _________ (“Creditor”), and
Debtor: __________________, with a mailing address of __________________, City of __________________, State of __________________, Zip _________ (“Debtor”).
HEREINAFTER, the Debtor and Creditor (“Parties”) agrees to the following:
II. BALANCE. At the time of this Agreement, the Debtor owes the Creditor the amount of __________________ Dollars ($_________) (“Current Balance”) for: (check one)
☐ - an Outstanding Balance.
☐ - Property described as: ______________________________________________________.
☐ - Service described as: ______________________________________________________.
☐ - Other: ___________________________________________________________________.
III. DISCOUNTED BALANCE. In consideration of the Debtor’s faith to repay the Current Balance in this Agreement, the Creditor agrees to: (check one)
☐ - No Discounted Balance. The Debtor shall pay the full Current Balance (“Amount Owed”).
☐ - A Discounted Balance. The Debtor shall only be obligated to pay the discounted amount of __________________ Dollars ($_________) ("Amount Owed"). If the Debtor should default under any of the terms of this Agreement, the Debtor shall owe the Creditor the Current Balance in addition to other penalties, fees, and any accumulated interest.
IV. REPAYMENT PLAN. To satisfy the Amount Owed, the Debtor agrees to repay the Creditor under the following terms:
a.) Down-Payment. The Debtor shall pay: (check one)
☐ - Down-Payment of $_________.
☐ - No Down-Payment.
b.) Interest Rate. The Amount Owed shall: (check one)
☐ - Bear interest at a rate of _______________ percent (____%) compounded annually. The rate must be equal to or less than the usury rate in the State of the Debtor.
☐ - Not bear interest.
a.) Repayment Period. The Debtor shall re-pay the Creditor on a: (check one)
☐ - Monthly basis beginning on __________________, 20____, in the amount of $_________ to be paid on the ____ of every month ending on __________________, 20____ or when the Amount Owed is paid-in-full.
☐ - Bi-Weekly basis beginning on __________________, 20____, in the amount of $_________ to be paid every fourteen (14) days ending on __________________, 20____ or when the Amount Owed is paid-in-full.
☐ - Weekly basis beginning on __________________, 20____, in the amount of $_________ to be paid every seven (7) days ending on __________________, 20____ or when the Amount Owed is paid-in-full.
☐ - Other. _______________________________________________________.
b.) Payment Instructions. The Debtor is required to pay the Creditor under the following instructions: _____________________________________________________________.
V. LATE PAYMENT. Any partial or late payment under this Agreement shall: (check one)
☐ - Not be allowed and consider the Debtor in default.
☐ - Allow the Debtor to make payment within ____ days provided the Debtor pays a late fee of: ___________________________________________________________ (“Extension Period”). If payment is not made within the Extension Period, this Agreement shall be in default.
VI. PREPAYMENT. The Debtor may: (check one)
☐ - Pre-pay the Amount Owed without penalty.
☐ - Not prepay the Amount Owed. If the Debtor decides to prepay the Amount Owed, the Debtor shall pay the penalty of: __________________________________________________.
VII. CO-SIGNER. (check the appropriate box)
☐ - This Agreement shall not have a Co-Signer.
☐ - This Agreement shall have a Co-Signer known as __________________ hereinafter known as the "Co-Signer” and agrees to the liabilities and obligations on behalf of the Debtor under the terms of this Agreement. If the Debtor does not make a payment, the Co-Signer shall be personally responsible and therefore is guaranteeing payment of the principal, late fees, and all accrued interest under the terms of this Agreement.
VIII. DEFAULT. If for any reason the Debtor should not oblige to any section or portion of this Agreement, the Debtor shall be considered in default. Under such an event, the remaining balance of the Amount Owed shall be due within five (5) business days with the Debtor liable to pay all reasonable attorney's fees and costs of collection of the Creditor. In addition, the Creditor may reclaim any property or goods in connection with the Amount Owed, hold and dispose of the same, and collect expenses, together with any deficiency due from the Debtor, subject to the Debtor's right to redeem said items pursuant to law.
IX. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of ___________________ (“Governing Law”).
X. SEVERABILITY. The unenforceability or invalidity of any clause in this Agreement shall not have an impact on the enforceability or validity of any other clause. Any unenforceable or invalid clause shall be regarded as removed from this Agreement to the extent of its unenforceability and invalidity. Therefore, this Agreement shall be interpreted and enforced as if it did not contain the said clause to the extent of its unenforceability and invalidity.
XI. ADDITIONAL TERMS & CONDITIONS.
XII. ENTIRE AGREEMENT. This Agreement contains all the terms agreed to by the Debtor and Creditor relating to its subject matter, including any attachments or addendums. This Agreement replaces all previous discussions, understandings, and oral agreements.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the undersigned dates written below.
Debtor’s Signature: ____________________________ Date: _________________
Co-Signer’s Signature (if any): ____________________________ Date: _________________
Creditor’s Signature: ____________________________ Date: _________________