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Installment Agreement Template Free Download Pdf
What Is A Loan Agreement?
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- A payment agreement outlines an installment plan to repay an outstanding balance that is made over a given time-frame. This is common when an amount is too much to pay for a debtor in a single installment. Therefore, the creditor agrees to make a deal that is affordable under the debtor’s financial situation.
- A payment agreement template is an important document which outlines all the terms and conditions of a loan. Information such as the periods of payment, the amounts, and the interest rates are essential to the loan agreement.So it’s important to document all these relevant information.
A Loan Agreement is a legally binding contract that helps in defining the terms of the loan and protects both the lender and the borrower. A loan agreement will help set the terms in stone and protect the lender if the borrower defaults while it helps the borrower follow the agreement terms such as interest rate and the repayment period.
Most loans, often personal loans are often done on a verbal understanding. This puts the lender at risk and many have often experienced the drawbacks of this. This highlights the importance of having a loan agreement handy and involving in the lending process. Not only is a loan contract legally binding but it also safeguards the lender’s money during the loan repayment period.
What Does A Loan Agreement Consist?
Just like any legally binding contract, a loan agreement has certain terminologies that are sprinkled throughout the contract. These terms have their own purpose in the loan agreement and hence it is important to understand the meaning behind these terms while drafting or using a loan agreement.
A loan agreement has the name and contact information of the borrower and lender.
While drafting the loan agreement, you have to decide on how you want the loan to be repaid. This includes the repayment date of the loan along with the payment method. You can choose between monthly installments or a lump sum amount.
With every loan, comes the interest. When it comes to a personal loan, if you don’t want any interest, the same has to be mentioned in the loan agreement. If you do want an interest then you need to mention how you want the interest to be paid and if pre-payment of the loan will come with any interest incentive or not.
Late fees and consequences of defaulting
Defaulting on a loan is a very real scenario, so is paying it back on a date later than the one that’s agreed upon. For this, you need to decide upon the agreeable ‘late payment’ date and the fees that come with it. In the case of a loan default, you need to define the consequences, such as ownership transfer of the collateral or whatever is mutually agreed upon.
Collateral is the borrower’s asset that they use to secure a loan from you. The loan agreement has to mention the item that is being used as collateral, this typically includes any real estate, vehicles or jewelry.
For those who don’t have a good credit history or if you don’t trust them with your money as they have a higher risk of default, a cosigner is brought into the loan agreement. A cosigner agrees to take over the loan payment if the borrower defaults.
Free Loan Agreement Template
For your Loan Agreement you can use download this free, print-ready template in Word (docs) or PDF.
Download Loan Agreement Template in Word (doc)
Download Loan Agreement Template in PDF
Payment Plan Contract Template Free Download
A payment agreement outlines an installment plan to repay an outstanding balance that is made over a given time-frame. This is common when an amount is too much to pay for a debtor in a single installment. Therefore, the creditor agrees to make a deal that is affordable under the debtor’s financial situation. It is common for payment agreements to require the debtor to directly pay via credit card or ACH (bank account direct payment) on a recurring basis.
- What is a Payment Plan?
- How to Setup a Payment Plan
A payment plan is a way for someone to pay for something over a length of time. This is often when an amount that is unaffordable to an individual is owed and the creditor allows payment over the course of months or years.
Under most payment plans, there is no or little interest as long as payments are made on time. This is a common incentive for the debtor to not default on their payment schedule.
If there is a traditional interest rate, it cannot be more than the State Usury Rate.
Setting up a payment plan requires the consent of a creditor and debtor and to define the terms and conditions in an agreement. For outstanding balances, a payment plan is often the “last chance” for the debtor to clear a debt.
Step 1 – Agree to Terms
The debtor and creditor must come to terms with a payment arrangement that benefits both parties. There are two (2) types of payment plans:
- Goods or Services – A payment plan created for a customer seeking to purchase goods or services with payments made over a short term (6-18 months). An interest rate is commonly charged.
- Examples: Motor Vehicle, Cell Phone, etc.
- Outstanding Balance – Used to consolidate or make an agreement with a creditor where funds are owed. If there is interest accumulating on the balance, it’s advised the debtor pay 20% of their income. When agreeing to terms the creditor may request the debtor’s last two (2) years of IRS income returns and a copy of their last paycheck.
- Examples: Past debt, Collections, etc.
Step 2 – Create a Payment Agreement
After agreeing to the balance owed, the terms of the payment plan should be written in a simple agreement. There is often no security pledged with the incentive to pay by the debtor is either interest-free payments or a discounted total balance.
The payment agreement should include:
- Creditor’s Name and Address;
- Debtor’s Name and Address;
- Acknowledgment of the Balance Owed;
- Amount Owed;
- Interest Rate (if any);
- Repayment Period;
- Payment Instructions;
- Late Payment (if any); and
- the State of Governing Law.
After the signature of the creditor and debtor, the agreement becomes legally valid.
For payment plans consisting of more than $10,000, it’s recommended for both parties to attach a Notary Acknowledgment to the agreement and sign in the presence of a Notary Public.
Step 3 – Begin the Payment Schedule
Use a Credit Card/ACH Authorization Form to obtain the debtor’s payment details. Most creditors will require the debtor to set up automatic payments that will either charge the debtor’s credit card or bank account for each installment period.
Step 4 – Release the Debtor
After the balance owed has been paid-in-full, the debtor will be released from any financial liability. This can be completed through a Release Form and may also be used by the debtor to clear any outstanding balances on their credit report.
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