Loan Agreement Between Friends

1. Introduction

This document serves as a loan agreement between two friends, specifying the terms and conditions under which the loan will be provided and repaid. It is crucial for both parties to understand and agree to the terms outlined below to avoid any misunderstandings in the future.

2. Parties Involved

• Lender: [Lender's Full Name], residing at [Lender's Address].
• Borrower: [Borrower's Full Name], residing at [Borrower's Address].

3. Loan Amount

The lender agrees to loan the borrower the amount of $[Loan Amount]. This amount will be transferred to the borrower’s bank account on [Date].

4. Purpose of the Loan

The borrower agrees to use the loan exclusively for [Purpose of the Loan], which should be clearly stated to avoid misuse of the funds.

5. Repayment Terms

• Repayment Schedule: The borrower agrees to repay the loan in [Number of Installments] installments.
• Installment Amount: Each installment will be $[Installment Amount].
• Due Date: Payments will be made on the [Day] of each month.
• Final Payment Date: The loan will be fully repaid by [Final Payment Date].

6. Interest Rate

• Interest Rate: The loan will accrue interest at an annual rate of [Interest Rate]%.
• Interest Calculation: Interest will be calculated [Monthly/Quarterly/Annually] and added to the outstanding balance.

7. Late Payment Penalties

If the borrower fails to make a payment by the due date, a penalty of $[Late Fee Amount] will be incurred. Continuous late payments may lead to renegotiation of terms or legal actions.

8. Early Repayment

The borrower may repay the loan in full before the agreed final payment date without incurring any penalty. Any prepayments will first be applied to the outstanding interest and then to the principal amount.

9. Default and Remedies

In the event of a default, defined as the borrower’s failure to make a scheduled payment after [Number of Days] days, the lender may:

• Demand immediate repayment of the outstanding balance.
• Seek legal remedies to recover the owed amount.

10. Modifications to the Agreement

Any modifications to this agreement must be made in writing and signed by both the lender and borrower. Verbal agreements or changes will not be considered valid.

11. Governing Law

This agreement will be governed by the laws of the state of [State/Country], and any disputes arising will be subject to its jurisdiction.

12. Signatures

By signing below, both parties agree to the terms and conditions outlined in this agreement.

Lender’s Signature: _____________________
Date: _____________________

Borrower’s Signature: _____________________
Date: _____________________

13. Witness (Optional)

A witness can be included to verify the signing of the agreement.

Witness’s Name: _____________________
Witness’s Signature: _____________________
Date: _____________________

14. Additional Provisions

[Any additional provisions or clauses agreed upon by both parties can be added here.]

15. Summary

This loan agreement between friends provides a clear and structured approach to lending and borrowing money. It ensures both parties understand their obligations and the terms of repayment. Having a formal agreement helps maintain the integrity of the friendship and provides a reference if any issues arise.