Sample Loan Agreement Between Two Parties Template

A loan agreement is a legal document outlining the terms and conditions of a loan between two parties. It provides clarity and protection for both the lender and the borrower. This comprehensive loan agreement template will guide you through creating an effective contract.

1. Introduction

The loan agreement begins with an introduction that includes the full names and addresses of both parties involved. It establishes the context and purpose of the loan.

Example:

“This Loan Agreement (the “Agreement”) is made and entered into on [Date] by and between [Lender’s Full Name], residing at [Lender’s Address] (hereinafter referred to as “Lender”) and [Borrower’s Full Name], residing at [Borrower’s Address] (hereinafter referred to as “Borrower”).”

2. Loan Amount and Disbursement

This section specifies the total amount of the loan and how it will be disbursed.

Example:

“The Lender agrees to loan the Borrower the sum of [Loan Amount] (the “Loan”), which will be disbursed to the Borrower’s account [Account Details] on [Disbursement Date].”

3. Interest Rate

The interest rate applied to the loan should be clearly stated. This section defines whether the interest is fixed or variable and the applicable rate.

Example:

“The Loan will accrue interest at a rate of [Interest Rate]% per annum. The interest rate is [fixed/variable], with changes applied according to [details].”

4. Repayment Terms

Details on how the loan will be repaid are outlined here. This includes the repayment schedule, frequency, and the total duration of the loan.

Example:

“The Borrower agrees to repay the Loan in [Number of Installments] monthly installments of [Installment Amount] each, beginning on [Start Date] and ending on [End Date].”

5. Late Fees and Penalties

This section outlines the fees and penalties for late payments or defaults on the loan.

Example:

“If the Borrower fails to make a payment within [Grace Period] days of the due date, a late fee of [Late Fee Amount] will be incurred. Additional penalties for default will be [details].”

6. Prepayment

Terms regarding prepayment, if applicable, should be included. This covers whether the borrower can repay the loan early without penalty.

Example:

“The Borrower may prepay the Loan in whole or in part at any time without penalty. Any prepayment will be applied to the outstanding principal balance.”

7. Collateral

If collateral is required, this section details what is being used to secure the loan.

Example:

“The Loan is secured by [Description of Collateral]. In the event of default, the Lender has the right to take possession of the collateral.”

8. Governing Law

This section specifies which state or country's laws govern the agreement.

Example:

“This Agreement shall be governed by and construed in accordance with the laws of the State of [State] or [Country].”

9. Dispute Resolution

Details on how disputes will be resolved, including arbitration or legal proceedings, are included here.

Example:

“Any disputes arising under this Agreement shall be resolved through [Arbitration/Mediation] in [Location]. The decision will be final and binding on both parties.”

10. Miscellaneous Provisions

This section includes additional clauses such as amendments, waiver of terms, and other legal considerations.

Example:

“No amendment or modification of this Agreement shall be valid unless made in writing and signed by both parties. A waiver of any provision of this Agreement does not constitute a waiver of any other provision.”

11. Signatures

Finally, both parties sign the agreement, acknowledging that they have read and agreed to the terms.

Example:

“IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as of the day and year first above written.”

Lender’s Signature: ______________________

Borrower’s Signature: ____________________

Date: [Date]

Conclusion

A well-drafted loan agreement protects both parties and ensures that all terms are clear and legally enforceable. By using this template, you can customize the agreement to fit your specific needs and ensure all necessary details are included.