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.
CocoSign represents a wide collection of legal templates covering all types of leases, contracts and agreements for personal and commercial use. All legal templates available on CocoSign shall not be considered as attorney-client advice. Meanwhile, CocoSign shall not be responsible for the examination or evaluation of reviews, recommendations, services, etc. posted by parties other than CocoSign itself on its platform.