Relying only on a verbal promise is often a recipe for a person who gets the short end of the stick. If the repayment terms are complicated, a written agreement allows both parties to clearly define all the terms of payment and the exact amount of interest due. If a party does not respect its side of the agreement, the written agreement has the added benefit that both parties understand the consequences. There are a number of ways to protect yourself from the loss of money: depending on the amount of money borrowed, the lender may decide to have the agreement approved in the presence of a notary. This is recommended if the total amount, the capital plus interest, is more than the maximum acceptable rate for the small claims court in the jurisdiction of the parties (usually 5,000 usd or 10,000 USD). Has a friend, relative or colleague borrowed money from you? Read our article with smart strategies that will help you get your money back. If you need to change your agreement, be sure to review your contract. You should sign it again in front of witnesses. A loan agreement is broader than a debt and contains clauses on the entire agreement, additional expenses and the modification process (i.e. to amend the terms of the agreement). Use a loan contract for large-scale loans or from several lenders. Use a debt note for loans from non-traditional lenders such as individuals or businesses rather than banks or credit unions. A loan agreement is a written contract between two parties – a lender and a borrower – that can be obtained in court if a party does not maintain its end.
I Owe You (IOU) – Acceptance and confirmation of money lent by one (1) party to another. There are usually no details on how or when the money is repaid or lists interest rates, payment penalties, etc. Guarantee (personal) – If someone does not have enough credit to borrow money, this form allows someone else to be liable if the debt is not paid. A loan agreement is a document between a borrower and a lender that explains a credit repayment plan. This way, if your friend needs more time to pay back, you can follow closely what has been agreed. The use of a loan agreement protects you as a lender because it legally requires the borrower to repay the loan in regular or lump sum payments. A borrower can also find a loan agreement useful because he spells the details of the loan for his files and helps keep an overview of the payments.