Personal Loan Agreement (With Interest)
This Personal Loan Agreement (With Interest) is to be used in the simplest of situations, for example where one family member loans money to another, or where money is loaned between friends or colleagues.
The Agreement provides for the money to be paid to the borrower in one lump sum on a single date. Repayment is also on a fixed date. However, there is a provision enabling the lender to demand repayment of the loan at any time, subject to service of a written notice. The borrower will be obliged to pay the loan back at the end of the period specified in the notice (for example, this could be fixed at one month, to allow the borrower sufficient time to find the funds).
The Agreement provides for interest to be calculated quarterly. Clause 4 provides two options in respect of interest payment – either interest is paid quarterly, OR interest is paid at the time that the loan is repaid. If you do not intend to charge interest on the loan please refer to our Personal Loan Agreement.
This Agreement provides a clear and unambiguous contract between the lender and the borrower, thus avoiding any dispute over the existence of the debt. If the borrower failed to repay, it would be open to the lender to bring a claim in the small claims track of the court system to recover the debt, using this Agreement as the basis of the claim.
If you require an agreement with more protection for the lender, please refer to other documents in this folder, in particular to the short version of the loan agreement. A further step would be to take some form of security against the loan – for that, please refer to the secured loan agreements.
NOTE: This Agreement is not intended to be regulated by the Consumer Credit Act 1974 which requires that businesses that lend money to consumers must be licensed to do so by the Office of Fair Trading. This agreement is not intended for consumer purposes; trading without a licence is a criminal offence and can result in a fine and/or imprisonment.