A personal loan agreement outlines the terms of how money is borrowed and when it will be paid back. It is a simple agreement that includes the borrowed amount, interest rate, and when the money must be repaid. If the borrower misses a payment or doesn’t pay back the loan, they will be in default of their agreement with the lender and subject to late fees and penalties.
A personal loan is a sum of money borrowed by an individual that may be used for any purpose. The borrower will be responsible for paying the lender back plus interest. Interest is the cost of a loan and is calculated annually.
The lender may be a bank, financial institution, or an individual – the loan agreement will be legally binding in either case.
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The main difference is the personal loan must be paid back on a certain date and a line of credit offers revolving access to money with no end date.
Unlike business or auto loans, whose terms prescribe how funds may be spent, personal loan money may be used for any purpose by the borrower.
Since personal loans are more flexible, and not tied to a particular purchase or purpose, they are often unsecured. This means that the debt is not tied to any real assets, unlike a home mortgage is to the house, or a car loan is to the vehicle. If a personal loan is to be secured with collateral, it should be specifically mentioned in the agreement.
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☐ – NOT Bear Interest. There shall be no interest associated with the Borrowed Money. The Borrower’s only obligation to the Lender is to repay the principal balance.
4. TERM. The total amount of the Borrowed Money, including principal and interest, shall be due and payable on [DATE] (“Due Date”).
Hereinafter known as the “Payment Schedule.” All payments made by the Borrower shall be first applied to any accrued interest and second to the principal balance.
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6. LATE PAYMENT. If the Borrower is late by more than [#] days for any payment due, it shall be considered late. If a payment is late, the Borrower shall be: (check one)
8. ACCELERATION. The Lender shall have the right to declare the Borrowed Money to be immediately due and payable, including interest owed, if any of the events are to occur:
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9. SEVERABILITY. If any provision of this Agreement or the application thereof shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Agreement nor the application of the provision to other persons, entities, or circumstances shall be affected, thereby, but instead shall be enforced to the maximum extent permitted by law.
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10. GOVERNING LAW. This Agreement shall be construed and governed by the laws located in the state of [GOVERNING LAW] (“Governing Law”).
The Guarantor, known as [GUARANTOR’S NAME], agrees to be liable and pay the Borrowed Amount, including principal and interest, in the event of the Debtor’s default. The Guarantor agrees to be personally liable under the terms and obligations of the Debtor in this Agreement.
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6. LATE PAYMENT. If the Borrower is late by more than [#] days for any payment due, it shall be considered late. If a payment is late, the Borrower shall be: (check one)
8. ACCELERATION. The Lender shall have the right to declare the Borrowed Money to be immediately due and payable, including interest owed, if any of the events are to occur:
9. SEVERABILITY. If any provision of this Agreement or the application thereof shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Agreement nor the application of the provision to other persons, entities, or circumstances shall be affected, thereby, but instead shall be enforced to the maximum extent permitted by law.
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10. GOVERNING LAW. This Agreement shall be construed and governed by the laws located in the state of [GOVERNING LAW] (“Governing Law”).
The Guarantor, known as [GUARANTOR’S NAME], agrees to be liable and pay the Borrowed Amount, including principal and interest, in the event of the Debtor’s default. The Guarantor agrees to be personally liable under the terms and obligations of the Debtor in this Agreement.
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