Free money agreement contract samples

Borrowing and lending money between family and friends can be rewarding but it can sometimes be very stressful too, using a free money agreement contract sample template to formalize the personal loan will really help to ensure everything goes smoothly.

Most people who lend money to friends and family avoid using these contracts because they think it will cost too much money or take too much time. The reality is that you can download these promissory agreements from the internet and write up sample loan agreements very quickly.

How to Write a Payment Agreement
With Sample Agreements

You’ll be able to find a payment promissory agreement which can be downloaded from docstoc.com or you can buy readymade templates from Amazon.com. Before you go and buy these items you should know that you can write one up yourself for free. There are some sample contract templates to borrow money from family and friends below that you can use for free below.

Who to Lend Money to
Assess Your Risk

Before you start writing promissory note templates you must remember that this is only a contact which states that one person has lent money to another person. If the borrower defaults then getting the money back could prove be very painful as you’ll have to contact attorneys and go through courts which will cost a lot of money. Instead of lending to anyone you need to establish a risk assessment criterion for everyone you lend money to.

If the person you want to lend money to has a habit of defaulting on their debt then you should seriously think twice before lending them money as it might be the last time you see it. If on the other hand the person has a well paid job that pays a reliable salary then it’s worth taking the risk. One point to note is that it might be worth asking for a credit file before you give out a personal loan, the credit file will allow you to establish whether it’s worth taking the risk by looking at the credit score. You should also probe the borrower to find out why they need the loan, do they need it for a loan consolidation, home improvement or to start a new business. These probing questions will give you a better idea as to whether it’s worth risking your money.

The Lending Money Agreement/Contract

Here is a basic template of money lending agreement/contracts between friends and families.

This promissory note agreement is between (Lenders name and address) and borrower (borrowers name and address) which has been witnessed by (witness name and address). The lender has proposed to lend (Enter the principal amount of the loan) to the borrower at the interest rate of 10%, the duration of the loan will be for 24 months.

The Monthly repayments which will include the principal and interest will be (enter the repayment amount) which will be due on the 15th of every month. All efforts should be made to meet the payment date otherwise there will be a late payment fee of $50 which will be added to the principal amount borrowed.

The security which has been used as collateral for this loan should the borrower default is (Enter the security), this item shall be handed over to the lender if the borrower cannot repay the loan in full.

Finish off the contract by getting the document signed by the borrower, lender and witness. If you can have the contract ratified and notarized by an attorney or lawyer or any legal firm this will make the agreement watertight.

The Pitfalls of Money Transfer Agreements

There are many pitfalls when it comes to promissory note contract agreement, if the borrower defaults because they are experiencing financial difficulties then it can be very hard to get your money back, sometimes the full and final settlement might be less that the principal amount. Some of the points that you should consider carefully are as follows:

Credit History: If you don’t know the person properly then asking for a credit history report will help you to understand the risk you’re undertaking by having a look at the credit score. Always ask probing questions and if they don’t meet your lending criterion then you just have to explain that this is business you can’t take on.

Interest Rate: Always be clear about the principal amount, the interest rate and how much they need to pay back on a monthly basis. From the onset explain any charges or fees that might apply if there’s a late payment or default. If you can take possession of the collateral then you will be in a stronger position if the borrower defaults.

Payments: You should never hand over cash as you won’t have proof that the transaction took place. You should either give a cheque or send the money via a bank transfer so that there is proof you sent the money. Insist that there is an automated regular payment going from their bank to your bank to avoid any late payments.

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Alternative Ways to Borrow

If you like the idea of lending money but don’t want to involve yourself too much into risk assessment then you might want to consider peer to peer lending which is a great way to start a lending business.

If you want to raise money for a brilliant business idea that you’ve had and your friends, family or bank won’t lend then you could try venture capitalists and millionaires who lend money.

Finally if you’re desperate for money and have nowhere to turn to and you’re experiencing hardship you could try asking rich wealthy millionaires for help. To be more accurate you could ask the charitable foundation run by these rich people for assistance.