Simple Personal Loan Agreement Between Friends

Introduction
When friends decide to lend money to each other, it’s essential to formalize the arrangement to avoid misunderstandings and preserve the relationship. A personal loan agreement between friends can help clarify the terms and conditions of the loan, ensuring that both parties are on the same page.

1. Parties Involved
1.1 Lender: The individual providing the loan.
1.2 Borrower: The individual receiving the loan.

2. Loan Amount
2.1 Total Loan Amount: Specify the exact amount of money being lent. For instance, "$5,000".

3. Loan Terms
3.1 Interest Rate: Indicate if there is an interest rate. If there is none, state “0%”.
3.2 Repayment Schedule: Detail the repayment schedule, such as monthly, quarterly, or annually. For example, "Monthly payments of $250 starting on [Start Date]."
3.3 Loan Duration: State the total duration of the loan, e.g., "12 months."

4. Payment Method
4.1 Mode of Payment: Specify how payments will be made, e.g., bank transfer, cash, or check.

5. Late Payment Penalties
5.1 Penalty Charges: Describe any penalties for late payments. For example, "A late fee of $25 will be charged for each missed payment."

6. Prepayment Terms
6.1 Early Repayment: Clarify if the borrower can pay off the loan early without penalty. State “The borrower can repay the loan early without additional charges.”

7. Default Terms
7.1 Consequences of Default: Outline the consequences if the borrower fails to repay the loan as agreed. For instance, "In the event of default, the lender may seek legal action."

8. Signatures
8.1 Lender’s Signature: Space for the lender to sign.
8.2 Borrower’s Signature: Space for the borrower to sign.
8.3 Date: The date when the agreement is signed.

9. Witness
9.1 Witness’s Signature: Optionally, have a witness sign to verify the agreement.

10. Modifications
10.1 Changes to Agreement: Any changes to the agreement must be made in writing and signed by both parties.

11. Governing Law
11.1 Applicable Law: State the legal jurisdiction governing the agreement, e.g., "This agreement will be governed by the laws of [State/Country]."

Example Agreement
1. Parties Involved
1.1 Lender: John Doe
1.2 Borrower: Jane Smith

2. Loan Amount
2.1 Total Loan Amount: $3,000

3. Loan Terms
3.1 Interest Rate: 0%
3.2 Repayment Schedule: Monthly payments of $250 starting on September 1, 2024.
3.3 Loan Duration: 12 months

4. Payment Method
4.1 Mode of Payment: Bank transfer

5. Late Payment Penalties
5.1 Penalty Charges: A late fee of $20 will be charged for each missed payment.

6. Prepayment Terms
6.1 Early Repayment: The borrower can repay the loan early without additional charges.

7. Default Terms
7.1 Consequences of Default: In the event of default, the lender may seek legal action to recover the remaining balance.

8. Signatures
8.1 Lender’s Signature: ________________________
8.2 Borrower’s Signature: ________________________
8.3 Date: ________________________

9. Witness
9.1 Witness’s Signature: ________________________
9.2 Witness’s Name: ________________________
9.3 Date: ________________________

10. Modifications
10.1 Changes to Agreement: Any modifications must be made in writing and signed by both parties.

11. Governing Law
11.1 Applicable Law: This agreement will be governed by the laws of [State/Country].

Conclusion
A written agreement is crucial when lending money to friends to ensure that both parties understand their obligations and rights. By clearly outlining the terms of the loan, you can help maintain a positive relationship and avoid potential conflicts.