Family Loan Agreement is a legally binding agreement between family members or close friends that spells out the terms of lending money with an aim of getting it back in a given duration of time with or without an accrued interest.
A Family Loan Agreement is a promissory note containing the borrower’s promise to pay the lender on demand or at a specified date. It is used to set forth the agreement between family members, friends, or loved ones in lending money with or without an accrued interest.
While borrowing from a loved one seems to be more flexible, it is best to treat such an agreement with the same respect a borrower gives to a prestigious bank or lending institution. Filling out a Family Loan Agreement template can help both parties establish a healthy borrower-lender relationship.
Enter the loan amount in words and figures.
Enter the loan date.
I. THE PARTIES
Enter the borrower's name.
Mailing address of
Enter the borrower's mailing address.
Enter the borrower's city.
Enter the borrower's state.
Agrees to pay $
Enter the loan amount.
Mailing address of
Enter the lender's mailing address.
Enter the lender's city.
Enter the lender's state.
a. Family Relation
Enter the relationship of the borrower with the lender.
Once per week beginning on
Mark the box if the loan, including the principal and any accrued interest, will be paid once per week and continue every seven days until the balance is paid. Then, enter the starting date.
Once per month beginning on
Mark the box if the loan, including the principal and any accrued interest, will be paid once per month and continue every seven days until the balance is paid. Then, enter the starting date.
Mark the box if the loan, including the principal and any accrued interest, will be paid other than the given method. Then, provide payment details.
Payable on the
Enter the date when the total amount of the loan shall be due and payable.
Interest at a rate of
Mark the box if the Family Loan Agreement will bear a certain interest rate. Then, enter the interest rate in words and figures.
Not bear interest
Mark the box if the Family Loan Agreement will not bear an interest rate.
This term states that the borrower has the right to make prepayments at any time without penalty.
Prepayment refers to the act of paying a loan or obligation before its due date.
This term states that the lender has jurisdiction to enforce his or her rights and remedies arbitrarily without prior notice to the borrower.
VI. EVENTS OF ACCELERATION
This term states that the agreement will constitute the Events of Acceleration if the borrower fails to pay any part of the principal or interest on due time and become insolvent and does not pay his or her debt.
Events of Acceleration refers to the occurrence of specific events that may enforce the borrower to make immediate payments of the entire loan, including the accrued and unpaid interest.
This term states that if Events of Acceleration occur, or the borrower has breached the contract, the lender has the right to enforce remedies or require the borrower to pay his or her debt immediately.
Acceleration is a clause that allows the lender to exercise his or her rights amidst the Events of Acceleration. The lender can declare that the entire debt must be paid before the standard terms.
This term states that the agreement between the lender and the borrower is subordinated. If the borrower has an outstanding debt to third-party lenders, the lender permits to prioritize such a debt than their agreement.
IX. WAIVERS BY BORROWER
This term states that the borrower waives any procedural objections such as protest, presentment, a notice of dishonor, and notice of acceleration of maturity. The borrower acknowledges the right of the lender to enforce remedies in events of acceleration.
This term states that the borrower must pay an attorney fee in addition to the principal and interest if he or she fails to pay the debt when due.
The maximum usury rate of
Enter the amount of attorney fee in words and figures.
Enter the state where the legal proceedings will take place.
XI. GOVERNING LAW
Enter the state to determine the laws that will govern the Family Loan Agreement.
This term states that the borrower and his or her assigns are bound to the Family Loan Agreement. It means that the borrower's successors or heirs provided in the contract shall pay all debts and promises in the event of his or her disappearance. On the other hand, the lender's successors or heirs are not bound to the benefits of the contract.
Borrower's Signature Over Printed Name
Enter the borrower's signature and printed name.
Enter the date when the borrower has signed the Family Loan Agreement.
Lender's Signature Over Printed Name
Enter the lender's signature and printed name.
Enter the date when the lender has signed the Family Loan Agreement.
Witness's Signature Over Printed Name
Enter the witnesses' signatures and printed names.
Enter the date when the witnesses have signed the Family Loan Agreement.
Lending money to a family member or friend creates uncertainty that the lender will not have the borrowed money back.
Hence, it is wise to outline the loan agreement between families or friends in writing to protect both parties. A Family Loan Agreement is a legally binding document that compels the borrower to abide by loan terms and conditions. It includes the borrower's obligation to pay the principal and interest in due time and the liabilities for breaching the contract.
Executing a Family Loan Agreement certifies that both parties understand the terms and conditions of their agreement. It also ensures the lender that he or she will get the borrowed money back. Otherwise, the borrower will be subjected to attorney fees and other compensations written on the contract.
The principal on loans refers to the exact amount borrowed or lent without interest. A borrower can make additional payments or pay a large amount of the principal to shorten the loan period.
The interest on loans refers to the expense of borrowing the money. It is the borrower's payment to the lender for providing the loan.
Loan agreements between family or friends can be flexible. There are instances when the lender does not put interest on the loan principal.
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