Monthly Payment Agreement Template: Everything You Need to Know
You can use a monthly payment agreement template as an outline for drafting the conditions and terms of a loan you lend to or borrow from another party. 3 min read
You can use a monthly payment agreement template as an outline for drafting the conditions and terms of a loan you lend to or borrow from another party. A written payment arrangement has several components, which include information such as the loan value, length of the payment period, and interest rates. A loan agreement is most helpful in the following cases:
- When wanting to document the total interest and payment amounts you must pay.
- There is a person who wants to borrow money from you, and you agree to lend him or her that specific sum of money.
- You wish to have an amortization table to show how a loan principal will get repaid.
- If you need extra money to fund a particular project, to make a specific purchase of an item, or for other personal reasons, and wish to borrow the money from another person.
Whenever money gets loaned, the first step of the whole loan requesting and funds granting process should be to draft a contract. Since loans come with a significant exchange of information, having a monthly payment agreement template can help you write out a thorough document to collect and organize loan details. In matters dealing with money, you should always take the extra care and attention to make sure there is no confusion or inadequate communication of information by creating a payment agreement.
Having a written agreement drafted protects both parties involved whether you are the borrower or the lender of the requested money. By having the essential details of a loan in print, the borrower is clear of his or her responsibilities to repay. Lenders have more confidence in knowing the borrowers have as much information as necessary for them to make the appropriate payment amounts on time. The contract outlines the consequences of failing to stay on schedule. With this document, the borrower is held responsible for complete repayment of the loan.
What Are the Components of a Monthly Payment Agreement Template?
The lender and borrower must both agree to the terms and conditions of a loan. That means a template must contain specific components with every detail and all necessary information significant to getting and repaying the credit. The agreement will describe the borrower's payments for the money owed, also referred to as the deficiency. Some of these template components include:
- Acknowledgment of the deficiency
- Full legal names of both the lender and borrower
- Loan amount
- Terms of payment
- Penalties for late payments
Acknowledgment of the Deficiency
The borrower must give an acknowledgment that the lender has given him or her a specific amount of money as a loan and that the deficiency exists.
Legal Names of Lender and Borrower
If the complete, legal names of the parties consenting to the agreement do not get included in the document, the entire contract is useless. You must have names spelled correctly or else the written agreement is invalid.
The exact amount the lender loans to the borrower must be precise. This part makes sure that the loan value written down is the correct amount of money the borrower owes. Besides the amount of money owed to the lender, here is where any interest amounts get included, if any.
Terms of Payment
This part of the agreement provides a space for both parties to write out the exact details of the payment method, schedule, and any other expectations, as they relate to the loan. Both persons must agree to the outlined terms, and the consent to accept those terms hold each party accountable for his or her failure to comply. This section can include the completion date of all loan payments.
Penalties for Late Payments
If during the payment period of the agreement the borrower makes a late payment, the processes or penalty fee amounts need to get written in this portion of the contract.
Other Components of an Agreement Template
The contract should state how neither signing party can change any document details like:
- Loan specifics
- Interest rates
- Penalty amounts
- Scheduled payment dates
If you and the other party agree to allow changes after everything gets signed, then map out a process for how changes get suggested, approved, or denied. If laws in your state are applicable, then cite them in the agreement. Doing so could help any legal issues come up. Having a severability clause included in the document will also make any illegal or invalid elements of the contract easy to remove when discovered, without having to draw up a new draft.
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