Loan Agreement Template

A loan agreement is a formal document that outlines the terms and conditions between a lender and a borrower. It serves to protect both parties and ensure that there is a clear understanding of the obligations involved. This template provides a comprehensive structure for a loan agreement, covering essential elements such as loan amount, interest rate, repayment terms, and default conditions. The following sections detail what to include in a loan agreement and provide a sample template for your use.

1. Introduction
The introduction of a loan agreement should clearly state the purpose of the document. It establishes the relationship between the lender and the borrower, outlining that the lender agrees to lend a specified amount to the borrower, who agrees to repay it under the defined terms.

2. Parties Involved
Identify the parties in the agreement. This section should include:

• Lender's Name: The individual or institution providing the loan.
• Borrower's Name: The individual or entity receiving the loan.
• Contact Information: Addresses and phone numbers for both parties.

3. Loan Amount
Specify the total amount of money being borrowed. This section should be clear and concise, stating:

• The principal amount of the loan.
• Any additional fees or charges associated with the loan.

4. Interest Rate
The interest rate is a critical part of any loan agreement. It should include:

• The type of interest (fixed or variable).
• The annual percentage rate (APR).
• How and when interest is calculated (e.g., monthly, annually).

5. Repayment Terms
Outline the repayment schedule, including:

• The length of the loan (e.g., 12 months, 5 years).
• The payment frequency (e.g., monthly, quarterly).
• The due date for each payment.
• The total number of payments to be made.

6. Late Fees and Default Conditions
This section should detail the consequences of failing to meet repayment terms, including:

• Any late fees that will be charged if payments are missed.
• The conditions under which the loan may be considered in default.
• The actions the lender may take in the event of default (e.g., legal action, asset seizure).

7. Prepayment Clause
If the borrower wishes to pay off the loan early, this section should state whether there are any penalties or fees for doing so.

8. Governing Law
Specify the jurisdiction under which the loan agreement is governed. This is important in case of disputes.

9. Signatures
Both parties should sign the agreement to make it legally binding. Include:

• Signature lines for both the lender and borrower.
• The date of signing.

Sample Loan Agreement Template

LOAN AGREEMENT

This Loan Agreement ("Agreement") is made and entered into on [Date], by and between:
Lender: [Lender's Name], located at [Lender's Address].
Borrower: [Borrower's Name], located at [Borrower's Address].

1. Loan Amount
The Lender agrees to loan the Borrower the sum of [Loan Amount] dollars ($[Amount]).

2. Interest Rate
The loan shall bear an interest rate of [Interest Rate]% per annum.

3. Repayment Terms
The Borrower agrees to repay the loan in [Number of Payments] payments of [Payment Amount] each, due on the [Due Date] of each month, starting on [First Payment Date] and ending on [Final Payment Date].

4. Late Fees and Default Conditions
If any payment is not received within [Number of Days] days of the due date, a late fee of [Late Fee Amount] will be assessed. The loan will be considered in default if [Default Conditions].

5. Prepayment Clause
The Borrower may prepay the loan in whole or in part without penalty.

6. Governing Law
This Agreement shall be governed by the laws of the State of [State].

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

_________________________
[Lender's Name]
Lender

_________________________
[Borrower's Name]
Borrower

Conclusion
A well-drafted loan agreement is essential for protecting both the lender and the borrower. It ensures that all parties understand their rights and responsibilities. This template provides a solid foundation for creating your own loan agreement, but it’s always wise to consult a legal professional for personalized advice based on your specific situation.