For private loans, it may be even more important to use a loan contract. For the IRS, money exchanged between family members may look like either gifts or credits for tax purposes. A loan agreement is broader than a debt and contains clauses on the entire agreement, additional expenses and the modification process (i.e. to amend the terms of the agreement). Use a loan contract for large-scale loans or from several lenders. Use a debt note for loans from non-traditional lenders such as individuals or businesses rather than banks or credit unions. Depending on the amount of money borrowed, the lender may decide to have the agreement approved in the presence of a notary. This is recommended if the total amount, the capital plus interest, is more than the maximum acceptable rate for the small claims court in the jurisdiction of the parties (usually 5,000 usd or 10,000 USD). Guarantee (personal) – If someone does not have enough credit to borrow money, this form allows someone else to be liable if the debt is not paid. The most important feature of a loan is the amount of money borrowed, so the first thing you want to write about your document is the amount that may be in the first line.
Follow by entering the name and address of the borrower and then the lender. In this example, the borrower is in New York State and asks to lend $10,000 to the lender. Has a friend, relative or colleague borrowed money from you? Read our article with smart strategies that will help you get your money back. Borrower – The person or company that receives money from the lender, who then has to repay the money according to the terms of the loan agreement. If you have already borrowed money and have not been repaid, understand the need for a credit contract. A legally binding loan agreement not only represents the terms of the loan, but also protects you if the borrower is late with the loan and does not pay you back as agreed. The loan agreement should clearly state how the money is repaid and what happens when the borrower is unable to repay.