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Free Personal Loan Agreement Template

Take advantage of our Personal Loan Agreement PDF template to safely lend money to another party. Download our pre-prepared document to set the terms of your loan in minutes.

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Last Update March 15th, 2023


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What Is a Personal Loan Agreement

A Personal Loan Agreement is a document that outlines the terms and conditions of a loan between two parties.

It is a legal contract that specifies the amount borrowed, the interest rate, the repayment schedule, and any other relevant details of the loan. 

It is typically created between an individual and one of the following:

  • Lenders (for example, a bank)

  • Family

  • Friends

With this agreement, you can follow certain guidelines or rules to lend money to friends or family that are more difficult to follow with other types of loans.

Types of Personal Loans

There are 5 different types of Personal Loans that you can use to borrow or lend money. These loans include:

  • Secured: Includes collateral

  • Fixed-rate: Keeps the interest rate the same throughout the repayment

  • Co-sign: Makes someone else liable if the borrower has poor credit

  • Variable rate: Ties interest rate to a third party

  • Unsecured: Does not require collateral

Unsecured loans are ideal when making a Personal Loan Agreement between friends and family.

When to Use a Personal Loan Agreement

Since most Personal Loans end up being unsecured, it’s a good idea to use them when lending money to friends or family members, as it helps to avoid misunderstandings and disputes.

However, Personal Loans are not only limited to small amounts or are created between family or friends. 

The circumstances below are when you may want to use a Personal Loan Agreement: 

  • Funeral costs

  • Family loans

  • Medical costs

  • Divorce costs

  • Home repair

  • Vehicle financing

  • Debt consolidation 

Depending on the amount of the Personal Loan and your relationship with the other party, you can decide on the type of loan you’d like to create.  

How to Write a Personal Loan Agreement

By including the necessary information and following a clear structure, you can create a legally binding agreement that protects each party. Follow the steps below to create your Personal Loan Agreement.

  1. Include Parties: This section identifies both parties involved in the loan agreement by including full legal names, addresses, and contact information.

  2. State the amount: Here you will include the amount of the loan. 

  3. Provide payment options and interest: How the loan will be repaid, whether in one lump sum or in installments must be included here along with if there will be interest or not.

  4. Mention the term: The term of the loan refers to the period of time during which the loan will be repaid. This should be included in the agreement, along with the date that the loan will be disbursed.

  5. Specify late fees: This should be clearly outlined in the agreement, including the amount of the fee and any grace period that may be granted.

  6. Include payment schedule: This should include the frequency of payments (for example, monthly, or bi-weekly), the due dates, and the amount of each payment.

  7. Add how income is verified: The methods of income verification are listed here. 

  8. Define “Event of Acceleration”: What events of acceleration are should be defined, and state that if one event happens the lender can declare the agreement immediately due and payable.

  9. Include a statement of remedies: The lender’s right to remedy any violation of the agreement must be added.

  10. Mention a statement of subordination: A statement of subordination of the borrower’s obligation must also be included.

  11. Specify waivers: A statement of waivers must be added, mentioning that the lender cannot be deemed to have waived any rights provided by the agreement. 

  12. State when legal expenses must be paid: If the borrower agrees to pay attorney fees if payment is past due, the state the loan will take effect in, must be provided. 

  13. Include governing law: These are the laws of the state where the agreement was made.

  14. Mention successors: The borrower’s successors must include written consent to accept being bound to the loan. This statement must be added here.

  15. Leave space for signatures: Both parties should sign and date the agreement to indicate their acceptance of the terms outlined in the document. 

Once you and the other party sign the document, the Personal Loan Agreement will be legally binding and enforceable.

Guarantee your document is correctly written by using ourPersonal Loan Agreement template to help write your document. 

Personal Loan Agreement Sample

Understanding the structure and terms that you should use is key when creating your Loan Agreement

To help you with that, we’ve included the following example.

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Other Financial Templates

There are other documents that you can use in similar financial situations. Some of these related documents include: 

FAQs About Personal Loan Agreements

Creating your document may lead to some confusion regarding signing requirements, terms, and more. 

Review the responses to the most frequently asked questions on the subject to clear up your concerns. 

Does a Personal Loan Agreement Need to Be Notarized?

A Personal Loan Agreement does not need to be notarized. However, when signing your document it is a good idea to do so in the presence of a notary public

Even though it is not legally required, adding a notary’s signature adds validity to the document. This will further ensure that the agreement is enforceable in a court of law.

How Can a Personal Loan Agreement Be Made Between Friends?

Depending on your level of friendship and confidence with the other party in the agreement, you may want to create an unsecured personal loan agreement. However, the terms should still be listed clearly.

By clearly writing the terms and conditions you can avoid confusion and arguments down the line. If it’s a friend that you don’t completely trust you can also add collateral to the agreement.

Can Personal Loans Be Paid Before the Due Date?

A borrower can pay off a Personal Loan at any time before the due date. However, if a prepayment penalty is included in the agreement then they would also have to pay that fine. 

By including a prepayment penalty the lender will be guaranteed to profit from making the loan. Otherwise, lenders lose out on interest if the borrower pays back the loan too early. 

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