How to Setup and Use a Personal Loan Agreement
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If you plan on making a personal loan to someone, you have a couple of choices. For a small loan to someone you know and trust, a verbal agreement may be enough. But for larger loans, or people you don't know as well, a personal loan agreement template can help you make an agreement that you both can sign.
That will make it easier for you to feel secure, and will also give you legal grounds if you find that the person doesn't want to repay you the way they said they would. Protecting yourself and your financial future is important. A personal loan agreement template can be among the best ways to do that.
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It's not always good practice to loan money to family and friends. But not all personal loans are made that way. Some are made to strangers, through investing and for other reasons. There are also plenty of cases where it is possible to loan to loved ones without issue. Here, we'll talk about:
- Important Clauses in a Personal Loan Agreement
- Best Practices for Personal Loans
- Tips for Securely a Loan Agreement
- Key Considerations for the Agreement
- More Resources to Consider
Important Clauses for Personal Loan Agreements
You aren't obligated to make personal loans to anyone. But if you decide to, it's important to protect yourself. Even with people you feel you can easily trust, problems can arise. It's just good business to have a personal loan agreement template that you can fill out and sign, to make sure both you and the person you're loaning to are on the same page. Some of the main clauses in the agreement include:
- The Loan Amount and Payment Plan -- The total amount of the loan, and the specifics of paying that amount back, are at the heart of this agreement.
- Interest and Late Fees -- Interest amounts and late fees both matter, but have to be clear to be enforceable.
- Penalties for Default -- If the borrower doesn't pay, they need to understand what the penalties are going to be. That way, you can hold them to the agreement more easily.
- Dispute Resolution -- Sometimes, disputes arise even with the best of intentions. How that dispute will be handled should also be put into the contract.
When you loan money to others on a personal level, a personal loan agreement template can help show that you're serious about the loan, and that you expect to be paid back according to the terms of that agreement.
Best Practices for Personal Loans
By making a personal loan, you're risking some of your own money and financial security to help someone else. A personal loan agreement template can help you create a great contract to protect yourself, in the event that the borrower doesn't pay. Some of the best practices for the creation of that agreement include:
- Spelling out the financial details, to make any penalties for default more enforceable.
- Adding in any specifics that aren't typical for the kind of agreement you're creating.
- Developing a personal loan agreement that meets legal requirements, so it's not found to be unenforceable.
Loaning money to someone, even if you trust them, always comes with risk. When you use a good personal loan agreement template, though, you lower that risk and make the personal loan more of a business decision.
Tips for Security in a Personal Loan Agreement
A personal loan should be handled just as seriously as something you would do in business. To make sure you're protecting yourself financially, use Nitro Sign for all your important documents, including personal loan agreements. Signing and sending online is efficient, safe, and secure.
Key Considerations for Personal Loans
There are some really important key considerations for any personal loan agreement, and when you use a personal loan agreement template you can handle those more easily. Some of the biggest considerations include:
- Making certain that all the details are clear, included, and legally binding.
- Using a template, so you know you're getting the right terminology included.
- Being fair with someone you may consider a friend or family member, but also not cheating yourself in the process.
A personal loan agreement template provides peace of mind, when you're doing something to help out a loved one.
Ready to learn even more about personal loan agreements? Here are some additional resources to take a look at: