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Promise to Pay Letter Template
What Is a Promise to Pay Letter?
Nobody is insured from obtaining a potential debt, particularly in business. Sometimes a small cash flow issue can cause delays in payment. A Promise to Pay Letter is a document that promises to repay a debt by an agreed date.
Alternate Name:
- Promise to Pay Debt Letter.
A Promise to Pay Letter template can be downloaded by clicking the link below. For example, there is an accounting error at your workplace which results in your salary being delayed - but you are required to pay rent. In this case, to avoid your landlord removing you from their property, you can draft a Promise to Pay Letter for Rent which outlines the promise you have made to your landlord.
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After both parties sign the agreement, it becomes legally binding. It contains the sum that the borrower has agreed to pay either in one full installment or broken down monthly installments. If the agreement proposes monthly installments, an installment plan must be written out with details about the financial payments and the dates of these payments. Usually, these agreements will have additional fees for late payments and may charge interest.
How to Write a Promise to Pay Letter?
Drafting a Promise to Pay Letter is fairly straightforward as long as you are aware of what to include. Such documents will usually contain:
- State the sum that is owed. This should be stated without adding on any interest fees or charges.
- Total sum. This sum should include any interest or fees in the total to make it clear. If interest is included, you must also explain how this interest will be determined. If the borrower will incur any fees for late payments, this also must be mentioned along with the deadline. Keep in mind, that each state has its own regulations in regards to interest rates and fees. Ensure you are aware of these laws as not to exceed the permitted maximum allowed by the state.
- Correct date. Ensure that you have not made any errors in the date of the letter as this could lead to the agreement being annulled.
- Identifying the individual in debt. This must be clearly outlined along with their personal information.
- Identifying the creditor party. Details about the party receiving the payment should be outlined in this section of the letter.
- Payment dates. The letter should clearly outline a structure for when payments should take place in the event of repayment in installments. This should include the dates of payment and the due sum of each payment. If the payment is due to be paid in full, a deadline date should be specified by which the whole outstanding amount needs to be repaid.
- Sign and date. Ensure that each involved party receives signs and receives their own individual copy.
Take into account that once all parties have signed the letter, it becomes legally binding. The payments must be made in full on the agreed dates.
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