Sample loan agreement pdf loan agreement is a legally binding agreement that describes the terms on which a loan will be extended and repaid. 90 billion is loaned between family and friends. A loan agreement helps each party know what the terms of repayment are and what will happen if a payment is late.
Understand the purpose of a loan agreement. A loan agreement is formal proof that the two parties have an agreement for how borrowed money will be paid back. It protects both parties in case they later have a disagreement with respect to the borrowed funds.
Confirm that you want to lend to the borrower. Before loaning money, you should assure yourself that the borrower will be able to pay back the loan.
First, you can trust your instincts: ask yourself how confident you are that the borrower will pay you back. You can ask the borrower to pull his or her credit report and share it with you. The score is good evidence of the person’s ability and willingness to repay the loan.
It also can tell you the borrower’s current indebtedness. You may want to see a 1040 form for proof of the borrower’s income. You could also ask to see a recent pay stub. If you are loaning to a small business, you may want to ask to see financial accounts.