A private lending agreement is an essential piece of documentation in the financial world. Whether you’re thinking about extending a current loan you have, changing the repayment terms and conditions, or loaning money for business or personal reasons, a private lending agreement is essential. This is because if difficulties or tensions arise between friends, businesses, or family members, the agreement can be referred to access the best way to move forward. An agreement like this is also essential if the situation becomes a legal battle.
Today, we’re going to detail everything you need to know in order to create and write your own professional and error-free private lending agreement that stands up in a court of law and minimizes the risk of confusion when loaning money.
Getting Ready to Write
Before you jump into writing your agreement, you’ll first want to get some things ready to ensure it’s professional quality and includes everything you need. Firstly, define the purpose of the loan. Who is the money going to and what is it being used for?
You then need to work out with the other party exactly how much is being loaned and how and when it’s going to be paid back. You’ll also want to form an agreement with the other party as to what will happen if repayments are late, such as interest, or if everything will be paid back by a final date.
Make Sure It’s the Right Thing to Do
Before you actually loan the money, ask yourself whether this is something you’re going to want to do. Is the person you’re lending to actually going to be able to pay the money back when you’ve agreed, or are they using you? Will you need the money in the future and this agreement could leave you out of pocket? “This is an important part of the process and could save you a lot of trouble if you can identify any issues here. For proof, you may want to see the third party’s proof of income, or even get references from their workplace,” shares Paul Harper, a writer from Studydemic.
Writing the Private Lending Agreement
Now you can start writing the loan agreement. You can do this in any word processing program. You can start with your name, the name of the lender, and the name of the person who is receiving the money. Be sure to date the document at the top and include the address of both parties and their phone numbers.
You’ll then want to detail the exact amount being loaned, any interest rates that are included with the loan (including samples), and then go onto detailing the agreed repayment schedule. Include an agreed end date where the entire loan should be finally paid off and finished with.
Finally, you’ll want to talk about any terms or clauses on what will happen if repayment is missed or the person stops paying you back. Once you’re happy with the private loan agreement, be sure to finish it off by detailing the laws in your area relating to this loan and create an area for the parties to sign.
Checking Your Agreement for Accuracy
You won’t want to finish off your agreement and then realize down the line there was an error in it that causes complications from a legal standpoint. The best thing to do is to check your content through to ensure it’s free from errors. There are some online tools that can help;
Use these online platforms to highlight and correct any grammar errors in your content.
- Boomessays and Academized
These are two leading online proofreading tools to help you identify and correct any errors in your agreement, as suggested by Studentwritingservices.com.
These two writing blogs are full of tips and advice on how to improve your general writing skills and style.
Use these editing tools to perfect the structure and professional tone of your private lending agreement, as recommended in Topcanadianwriters.com.
These writing guides can be used and followed to create effective and comprehensive private lending agreements and to ensure they remain professional.
Be Sure to Check Before Signing
Once you’ve finished and finalized your private lending agreement, you need to make sure it’s been read through by both parties and agreed upon. If you’re both happy with the content, be sure to sign it and have a copy each.
In some cases, you may want to have your private lending agreement read through by a legal expert.
