Free Loan Agreement

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Free Free Loan Agreement

  1. Answer a few simple questions
  2. Email, download or print instantly
  3. Just takes 5 minutes

Loan Agreement

Collateral


Collateral



Frequently Asked Questions
When should collateral be used?Collateral is an asset or property offered by the borrower to secure repayment of a loan.

Securing the Loan Agreement with collateral allows the lender to receive compensation if the borrower fails to make payments. It's most useful when there is a high risk the borrower will default or there is a substantial amount being loaned.

If the loan is not secured with collateral, the lender will need to go to court before seizing any of the borrower's assets.
Yes, it is a good idea for the lender to register their interest in the collateral on the Personal Property Securities Register (PPSR). Registering their interest gives the lender a better chance of recovering any unpaid loan amounts if the borrower defaults. The lender can register their interest on the PPSR online.

If the collateral being used is land, a house or other building, or a ship longer than 24 metres the lender's interest cannot be registered on the PPSR.


Your Loan Agreement

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LOAN AGREEMENT

THIS LOAN AGREEMENT (this "Agreement")  dated this ________ day of ________________, ________

BETWEEN:


__________ of ______________________________________
(the "Lender")

OF THE FIRST PART

AND


__________ of ______________________________________
(the "Borrower")

OF THE SECOND PART

IN CONSIDERATION OF the Lender loaning certain monies (the "Loan") to the Borrower, and the Borrower repaying the Loan to the Lender, the parties agree to keep, perform and fulfill the promises and conditions set out in this Agreement:

  1. Loan Amount & Interest
  2. The Lender promises to loan $____________________USD to the Borrower and the Borrower promises to repay this principal amount to the Lender, without interest payable on the unpaid principal, beginning on July 4, 2022.
  3. Payment
  4. This Loan will be repaid in full on July 4th, 2022.
  5. At any time while not in default under this Agreement, the Borrower may make lump sum payments or pay the outstanding balance then owing under this Agreement to the Lender without further bonus or penalty.
  6. Default
  7. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing under this Agreement at that time to be immediately due and payable.
  8. Governing Law
  9. This Agreement will be construed in accordance with and governed by the laws of the Commonwealth of Virginia.
  10. Costs
  11. The Borrower shall be liable for all costs, expenses and expenditures incurred including, without limitation, the complete legal costs of the Lender incurred by enforcing this Agreement as a result of any default by the Borrower and such costs will be added to the principal then outstanding and shall be due and payable by the Borrower to the Lender immediately upon demand of the Lender.
  12. Binding Effect
  13. This Agreement will pass to the benefit of and be binding upon the respective heirs, executors, administrators, successors and permitted assigns of the Borrower and Lender. The Borrower waives presentment for payment, notice of non-payment, protest, and notice of protest.
  14. Amendments
  15. This Agreement may only be amended or modified by a written instrument executed by both the Borrower and the Lender.
  16. Severability
  17. The clauses and paragraphs contained in this Agreement are intended to be read and construed independently of each other. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
  18. General Provisions
  19. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
  20. Entire Agreement
  21. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise.

IN WITNESS WHEREOF, the parties have duly affixed their signatures on this ________ day of ________________, ________

SIGNED, SEALED, AND DELIVERED
this ________ day of ________________, ________.

   


_____________________________
__________

     


SIGNED, SEALED, AND DELIVERED
this ________ day of ________________, ________.

   


_____________________________
__________

     


Last updated June 10, 2022

What is a Loan Agreement?

A Loan Agreement is a document between a borrower and lender that details a loan repayment schedule. 

You can use our Loan Agreement template for a variety of purposes, including:

  • Personal lending between friends or family
  • Business transactions, such as securing capital for a startup 
  • Financing large purchases, such as a vehicle, boat, or furniture
  • Borrowing for real estate purchases and down payments
  • Student loans for tuition and other educational expenses

What is the difference between a Loan Agreement and a Promissory Note?

A Loan Agreement is slightly more comprehensive than a Promissory Note and includes clauses about:

  • Amendments: Both parties in the contract must agree in writing to any term changes.
  • General Provisions: The headings in the Loan Agreement are for clarity and are not meant for courts to interpret when enforcing the contract. Likewise, singular nouns mean and include plural forms; any masculine and feminine words are interchangeable. 
  • Entire Agreement: The written contract constitutes the entire agreement between the parties. There are no other provisions, oral or otherwise.

You can use a Loan Agreement for loans of a large amount or that come from multiple lenders. Use a Promissory Note for loans that come from non-traditional money lenders like individuals or companies instead of banks or credit unions.

Why should I use a Loan Agreement?

Using a Loan Agreement protects you as a lender because it legally enforces the borrower's pledge to repay the loan in regular payments or lump sums.

As a borrower, you may also find a loan contract useful because it spells out the details of the loan for your records and helps keep track of payments.

What does a Loan Agreement include?

1. The location

People usually choose the lender's location for the Loan Agreement, but if the agreement is for the purchase of assets, then the parties might choose to list the location of the assets instead.

Each state has different laws regarding Loan Agreements. The state you list in your location determines which jurisdiction’s laws will be used to enforce the agreement and resolve any disputes that may occur.

2. Details about the lender and borrower 

Provide the names and addresses of the parties involved, including whether they are individuals or corporations. You may also add a co-signer who agrees to pay the debt if the borrower defaults on the loan.

3. The loan amount and loan date

The amount of money being lent to the borrower is the loan amount, also known as the principal amount. Also include the date that the principal amount will be lent to the borrower.

4. Interest and late fees 

If the lender charges interest, they may specify the percentage of interest and how often it compounds (monthly, every six months, or yearly). The lender may also penalize overdue payments by charging late fees or increasing the interest rate.

5. The repayment method

The borrower may repay the loan in a single payment or in regular payments. The agreement should outline the repayment schedule, including when the final amount is due and if the borrower can repay the loan early or in lump sums.

6. Collateral and insurance

The borrower may secure the loan with collateral (e.g., a valuable item such as a vehicle, piece of equipment, or jewelry). In this case, the lender may seize the collateral if the borrower cannot repay the full loan amount. 

The lender may also require the borrower to obtain insurance if using the loan to buy a vehicle.

Should I charge interest in the Loan Agreement?

Lenders who want compensation for the risk involved when lending money typically charge interest.

You can also begin charging interest (or increase the original interest rate) if the borrower fails to make a payment on time. The increased interest provides you with additional compensation for the borrower's failure to pay as promised and the trouble of having to enforce the Loan Agreement.

If this is a personal loan, note that the Internal Revenue Service (IRS) recommends minimum interest rates that you should charge for below-market personal loans above $10,000. 

Do you need a witness for a Loan Agreement?

Most jurisdictions do not legally require Loan Agreements to be witnessed. However, a witness can verify the signatures on the contract and provide testimony to the binding nature of the agreement

Local laws may specify witness requirements, but typically a witness to a Loan Agreement can be any neutral third party (with no financial or other interest in the contract). 

Notarizing your Loan Agreement

A notary public specializes in verifying signatures and deterring fraud. If a borrower denies entering into a Loan Agreement, a notary acknowledgment can prove that they knowingly signed the contract. Notarization can also eliminate the need for witnesses to testify in court. As such, lenders should notarize their Loan Agreement if they want to ensure the document’s legal enforcement. 

LawDepot’s Loan Agreement template gives you the option to include a Notary Acknowledgement in your document. 

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