A promissory note or an agreement must always be drawn before lending money to someone. Even if you are lending money to a friend or a family member whom you trust, it is better to agree to the terms on paper rather than get involved in disputes at a later time.
A money loan agreement is usually drawn by a lawyer but if you do not want it to be too formal, you can always write one yourself – in the form of a letter. The agreement will primarily consist of you charting out how much money is being lent and what the payback conditions are. If there is anything special that you want to put in – like what consequences will prevail if payback conditions are not met – do put it in so that you can have a cover for yourself.
Remember that you are lending money to someone on the pretext that it will be paid back so you have to play it safe. Since you are lending money, you will be charging a certain amount of interest so it is important to mention the interest rate as well. If possible, try to put in all the details – amount lent, payback method, monthly or weekly payments and interest rate.
What follows is a sample money loan agreement letter that you can take ideas from:
Money Loan Agreement
This agreement is being made on January 10, 2015 between John Cusack (Lender) and Kyle Zanders (Borrower) for a specified loan amount, the details of which are stated below:
Loan Amount: $10,000
Payback Period: 36 months
Monthly Installments without Interest: $277.77
Interest Rate: 8%
Monthly Installments with Interest: $300
Terms and Conditions:
• Payments are to be made on the 5th day of each month at the very latest
• All payments will be made through checks. No cash payments will be accepted
• Any delay in payments may mean additional charges being posted to the monthly installments
• The Lender reserves the right to revoke or add addendums to this agreement if there is any significant change in the employment status of the Borrower
• The Borrower must ensure that the monthly payment check is delivered to the Lender by the 4th day of each month at the very latest
Both parties must sign and retain a copy of this agreement for future reference. In case there are addendums added to this loan agreement, copies will be delivered to both parties on immediate basis.
John Cusack (Lender)
Kyle Zanders (Borrower)