Loan Agreement

A Loan Agreement is a written promise from a lender to loan money to someone in exchange for the borrower's promise to repay the money lent as described by the Agreement.

Its primary function is to serve as written evidence of the amount of a debt and the terms under which it will be repaid, including the rate of interest (if any). The note serves as a legal document that is enforceable in court creating obligations on the parts of both the borrower and the lender. Use this Loan Agreement template to lend or borrow money.

Though Loan Agreements are often referred to as IOUs or Promissory Notes, Loan Agreements are different than these documents in two key respects:

- First of all, Loan Agreements are binding on both the borrower and the lender; and

- Secondly, Loan Agreements are much more detailed and include extensive provisions about when and how the borrower will repay the loan and what sorts of penalties will be incurred if the borrower does not follow through with repayment.

- Finally, Loan Agreements are usually used when large sums of money are involved, such as student loans, mortgages, car loans, and business loans. For smaller and/or more informal loans, such as those between family and friends, a Promissory Note should be used instead.

To find more information about whether a Promissory Note or Loan Agreement is more appropriate, please see the guide What is the Difference Between a Promissory Note and Loan Agreement?

How to Use this Document

This Agreement sets out all of the terms and details of the loan, including the names and addresses of the borrower and lender, the amount of money being borrowed, how often payments will be made, the amount of the payments, and the signatures of the parties.

This document can be used for different types of loans including the following:

• Installment Loan: The borrower pays off the loan, plus interest (if any), by making payments over a set period of time, such as annually, monthly, or weekly.

• Lump Sum Payment: The borrower pays off the money borrowed, plus interest (if any), in one single payment due on a pre-agreed upon date

• Due on Demand: The borrower pays off the money borrowed, plus interest (if any), in a single payment due at the time the Lender requests it.

The document can also specify whether or not interest will accrue on the loan and, if so, the interest rate that will be used. There is also. the option of including provisions to govern early payments as well as an acceleration clause that would cause the entirety of the loan to come due in the event of late payments or non-payment according to the agreed upon payment plan schedule.

Once all of the provisions of the contract have been filled out, both the borrower and the lender should print out and sign the document, each saving a copy for their records in case of future misunderstanding or dispute.

If the lender and the borrower decide to change the terms of the Loan Agreement, use an Amendment to Agreement form. Once the loan has been fully repaid, complete a Release of Loan Agreement form.

Applicable Law

Loan Agreements are governed by Article III of the Uniform Commercial Code (the "UCC").

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.