We’ve worked closely with legal experts and proofreaders to design a simple payment agreement template (PDF and Word) to help you in your financial dealings.
We’ve worked closely with legal experts and proofreaders to design a simple payment agreement template (PDF and Word) to help you in your financial dealings.
What’s in this template?A payment agreement is a legal contract detailing the terms of installment payments between the lender (the creditor) and the payer (the debtor). Let’s look at a quick example to illustrate the nature of a payment agreement.
Creditors and debtors can be individuals or any business entity. Also, payment contracts can be used in both personal and commercial transactions.
DISCLAIMER: We are not lawyers or a law firm and we do not provide legal, business or tax advice. We recommend you consult a lawyer or other appropriate professional before using any templates or agreements from this website.
If not managed with the appropriate parameters, payment agreements can quickly escalate into nasty law claims and disputes. That’s why we’ve developed a simple payment contract template to help protect lenders and borrowers and debt-related transactions.
Click below to get a copy of our payment agreement sampleBorrowing money is one of the most common financial transactions in society. Whether it’s borrowing money from your parents or making a deal with a potential business partner, debt exists in much of our dealings.
It’s tempting to rely on handshakes or verbal agreements when organizing a payment plan. We hear it all the time, “I promise I’ll pay you back.”
However, no matter how pure our intentions are, things come up in life, and sometimes debtors are unable to repay their creditors.
If you don’t use a payment contract template for these types of transactions, the risk for a creditor is you don’t get your money back. There are no legal consequences if your debtor fails to make their repayments.
A payment agreement contract holds all parties accountable to the payment plan and acts as a point of reference if disputes escalate.
While payment agreements can be complicated with a list of terms and conditions, when it comes down to it, only a handful of elements matter. Let’s look at each one below.
The foundation of your payment agreement is based on the amount of the debtor wants from the creditor.
Context matters here—and as a creditor, getting a gauge of what the debtor wants the funds for is essential. Is it for a large asset, a business, student fees, or medical bills?
If the creditor wants money to use for their living expenses, this might be a red flag that they’re struggling to generate enough income to meet their basic needs. Conversely, if your creditor needs funds for an unexpected one-off payment, you might feel more confident about loaning them the money.
There are no hard and fast rules, but ultimately you need to determine how much you’re willing to trust the other party.
Another vital element of any payment agreement template is capturing the borrowers’ repayment schedule. Parties need to agree on how and when payments will be made.
For instance, creditors may request that payments are to be made via direct deposit and are due on the 15th of every month.
Of course, the payment plan’s specifics can be negotiated before signing the contract, in the event that the debtor has different preferences for payment method and frequency.
The key to a successful payment agreement is ensuring borrowers make consistent payments under the terms of the contract. If debtors fail to adhere to the payment plan, it’s common for creditors to declare the remaining amount, including interest.
Lenders must make it clear on the contract the terms of payment defaults.Sometimes, no matter how much planning you do, circumstances may change the nature of your agreement.
If, for example, a debtor requests to extend the payment plan or asks for money funds, then you need a clause in your template that ensures that all parties sign off on the new terms of the agreement.
A payment agreement is not legally binding without written consent from both the creditor and the debtor. Signatures are legal proof that all parties acknowledge and accept the terms of the payment contract.
If not managed with the appropriate parameters, payment agreements can quickly escalate into nasty law claims and disputes. That’s why we’ve developed a simple payment contract template to help protect lenders and borrowers and debt-related transactions.
