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Family Loan Agreement Template
Family Loan Agreement: What Is it?
A Family Loan Agreement refers to a detailed contract signed by the lender and the borrower that are related by marriage or blood and want to record the amount of money one of the relatives gives to the other and the terms of repayment.
Alternate Name:
- Friends and Family Loan Agreement.
Usually interest-free, this kind of personal loan may be the perfect solution for individuals that cannot file a loan application with a financial institution to get the money they need or whose application was rejected. Whether you are planning to make a down payment on your house or you are struggling with your day-to-day expenses, a loan from a family member can help you handle financial difficulties with minimal loss.
You may find a Family Loan Agreement template through the link below.
How to Write a Loan Agreement Between Family Members?
Even though it may be tempting to have a verbal Loan Agreement Between Family Members considering you and your relative have known each other for many years and there is mutual trust, there is always a risk of non-payment which may ruin the relationship between you and other family members that might take sides in a personal conflict. This is why it is important to compose a contract keeping everyone on the same page and demonstrating the intention of the borrower to give the funds back.
Here is how you should prepare a simple Family Loan Agreement:
- Identify the counterparts by their full names and addresses.
- Explain the objective of the agreement - the lender provides the borrower with a specific sum of money expecting the repayment within a certain time period.
- List the conditions of the loan . It is up to the parties to decide how regular the payments will be and whether there is a need for an interest rate. Negotiate with your relative and find a solution convenient for both of you. You should draw a payment schedule and indicate the proper notification system that will help the lender to be sure the person that borrowed from them does not disappear.
- Consider adding a provision that gives the borrower the right to repay the loan in full without any fees or penalties - this is reasonable if the document does not mention an interest rate.
- Add the remedies available to the lender - in case the borrower violates the terms of the contract, the non-breaching party should reach out to them with a formal letter demanding payment - only after this measure did not have an intended outcome, you should file a lawsuit using the agreement as evidence of the loan.
- Sign and date the papers . While a personal loan is rarely notarized, if you are lending a significant amount of money or helping your relative to pay a house deposit, it is advised to find two impartial witnesses who will verify your identities and sign the document with you to add an extra level of protection to your loan arrangement.
Still looking for a particular template? Take a look at the related templates below:
Download Family Loan Agreement Template
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