Lending money to colleague with interest – how to legally bind agreement
How do you write a loan agreement?
To draft a Loan Agreement, you should include the following:
- The addresses and contact information of all parties involved.
- The conditions of use of the loan (what the money can be used for)
- Any repayment options.
- The payment schedule.
- The interest rates.
- The length of the term.
- Any collateral.
- The cancellation policy.
What is covered in a loan agreement?
Loan agreements typically include covenants, value of collateral involved, guarantees, interest rate terms and the duration over which it must be repaid. Default terms should be clearly detailed to avoid confusion or potential legal court action.
What is the difference between a promissory note and a loan agreement?
In general, promissory notes are used for more informal relationships than loan agreements. A promissory note can be used for friend and family loans, or short-term, small loans. Loan agreements, on the other hand, are used for everything from vehicles to mortgages to new business ventures.
What is the purpose of a loan agreement?
The purpose of a loan agreement is to detail what is being loaned and when the borrower has to pay it back as well as how. The loan agreement has specific terms that detail exactly what is given and what is expected in return.
Can I write my own loan agreement?
For a personal loan agreement to be enforceable, it must be documented in writing and signed by both parties. You may choose to keep a copy in your county recorder’s office if you wish, though it’s not legally necessary. It’s sufficient for both parties to store their own copy, ideally in a safe place.