Sample Loan Agreement Letter Between Friends
[Your Name]
[Your Address]
[City, State, Zip Code]
[Email Address]
[Phone Number]
[Date]
[Friend's Name]
[Friend's Address]
[City, State, Zip Code]
[Email Address]
[Phone Number]
Dear [Friend's Name],
RE: Loan Agreement
I hope this letter finds you well. I am writing to formalize the terms of a personal loan that I am providing to you. Our friendship is important to me, and I believe that open communication and clear agreements are essential in maintaining our strong bond.
1. Loan Amount: I, [Your Name], am lending you the sum of [Loan Amount in Words] ([Loan Amount in Numbers]) to be used for [Specify Purpose of the Loan].
2. Repayment Terms: You agree to repay the loan amount in [Number of Installments] equal installments, with the first payment due on [First Repayment Date]. Subsequent payments will be due on the same day of each month until the loan is fully repaid.
3. Interest Rate: To ensure fairness and cover any administrative costs, an interest rate of [Interest Rate]% per annum will be applied to the outstanding loan balance. Interest will accrue from the date of disbursement until the loan is fully repaid.
4. Method of Repayment: You agree to make the repayments via [Specify Payment Method], which may include bank transfer, check, or any other mutually agreed method.
5. Late Payments: In the event of a late payment, a late fee of [Late Fee Amount] will be charged for each installment that is not paid within [Number of Days] days of the due date.
6. Prepayment: You have the option to make prepayments at any time, which will be applied towards the outstanding balance of the loan.
7. Security: The loan will be unsecured, meaning no collateral is required.
8. Termination: This agreement may be terminated by mutual written consent or upon full repayment of the loan amount.
9. Governing Law: This agreement shall be governed by the laws of the state of [Your State].
Please review these terms carefully. If they accurately reflect our understanding, please sign a copy of this letter and return it to me. Once I receive the signed copy, I will provide you with the loan amount.
I want to emphasize that our friendship is of utmost importance to me, and I am confident that we will both honor our commitments as outlined in this agreement. If you have any questions or concerns, please feel free to contact me.
Thank you for your understanding, and I look forward to a successful and mutually beneficial arrangement.
Sincerely,
[Your Signature]
[Your Typed Name]
Accepted and Agreed:
[Friend's Signature]
[Friend's Typed Name]
Date: [Date of Agreement Acceptance]
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Simple Loan Agreement Letter Between Friends
Dear [Friend's Name],
I hope this message finds you well. As discussed, I am lending you [amount] on [date]. This amount will be repaid in full by [repayment date].
Both of us agree to the terms and conditions outlined verbally, and this letter serves as a written record of our agreement.
Thank you for your understanding and friendship.
Sincerely,
[Your Name]
[Date]
Formal Loan Agreement Letter Between Friends
Dear [Friend's Name],
This letter serves as a formal agreement regarding the loan of [amount] provided by me on [date]. The borrower agrees to repay the total amount of [amount] by [repayment date] in [installments/one-time payment].
Both parties agree to the terms and acknowledge that this letter represents our mutual understanding of the loan conditions.
Sincerely,
[Your Name]
[Date]
Loan Agreement Letter With Interest Between Friends
Dear [Friend's Name],
As discussed, I am providing a loan of [amount] on [date], which will accrue an interest of [interest rate]% per [month/year]. The total repayment of [total amount including interest] is due by [repayment date].
This agreement ensures clarity and understanding between both parties regarding repayment terms.
Sincerely,
[Your Name]
[Date]
Provisional Loan Agreement Letter Between Friends
Dear [Friend's Name],
This is a provisional agreement regarding the loan of [amount] I am providing to you on [date]. The repayment schedule will be finalized by [date], but the initial repayment of [initial amount] is expected by [first payment date].
This letter serves to document our understanding temporarily until the full terms are agreed upon.
Best regards,
[Your Name]
[Date]
Heartfelt Loan Agreement Letter Between Friends
Dear [Friend's Name],
I am happy to assist you with a loan of [amount] on [date]. I trust that you will repay it by [repayment date] as we discussed. This letter simply confirms our mutual understanding.
I value our friendship and am confident this agreement will strengthen trust between us.
Warm regards,
[Your Name]
[Date]
Loan Agreement Letter With Repayment Installments Between Friends
Dear [Friend's Name],
As agreed, I am lending you [amount] on [date]. The repayment will be made in [number of installments] installments of [installment amount] each, starting from [first installment date] and ending on [final installment date].
Both of us acknowledge and agree to the outlined repayment schedule.
Sincerely,
[Your Name]
[Date]
Loan Agreement Letter With Collateral Between Friends
Dear [Friend's Name],
This letter confirms the loan of [amount] provided on [date], with [collateral item] pledged as security. The repayment of the full amount is due by [repayment date]. Both parties agree that the collateral will be returned upon full repayment.
Thank you for honoring this agreement.
Sincerely,
[Your Name]
[Date]
What is a Loan Agreement Letter Between Friends and Why It Is Needed
A Loan Agreement Letter Between Friends is a written document that records the terms and conditions of a personal loan.
Purpose:
- To prevent misunderstandings regarding repayment.
- Establish clarity and trust between friends.
- Serve as evidence of the loan in case of disputes.
- Outline terms like repayment date, interest (if any), and collateral (if applicable).
Who Should Send a Loan Agreement Letter Between Friends
- The lender providing the loan.
- A mutually agreed-upon representative if both parties want third-party confirmation.
- It can also be jointly drafted by both friends for transparency.
Whom Should the Loan Agreement Letter Be Addressed To
- The friend borrowing the money.
- Optionally, copy can be shared with a trusted third party for record-keeping.
- In some cases, for legal acknowledgment, a notary may be included.
When to Use a Loan Agreement Letter Between Friends
- When lending any significant sum of money to a friend.
- Before providing the money to ensure clear terms are agreed upon.
- When repayment involves installments or interest.
- If collateral is involved in the loan.
How to Write and Send a Loan Agreement Letter Between Friends
- Start with a friendly but clear greeting.
- State the loan amount and date provided.
- Specify repayment terms: date, installments, and interest if applicable.
- Mention collateral if involved.
- Close with acknowledgment of mutual agreement and signatures.
- Send as email for convenience or printed letter for formal record.
Requirements and Prerequisites Before Writing the Letter
- Agreement on loan amount and repayment terms.
- Understanding of whether interest will be applied.
- Any collateral details if the loan is secured.
- Mutual consent to record the agreement in writing.
Formatting Guidelines for Loan Agreement Letters Between Friends
- Length: 150–300 words.
- Tone: Friendly, respectful, but clear and serious.
- Style: Structured with clear repayment terms.
- Mode: Printed letter preferred for formal record, email acceptable for quick agreements.
- Include date, signatures, and witness if necessary.
Common Mistakes to Avoid
- Leaving repayment terms vague or unspecified.
- Omitting interest or collateral agreements if applicable.
- Using overly casual language that may create ambiguity.
- Not having any written record at all, relying solely on verbal promises.
Essential Elements and Structure of the Letter
- Salutation addressing the friend.
- Loan amount and date of issuance.
- Repayment terms (date, installments, interest).
- Collateral details (if any).
- Signatures of both parties and date.
- Optional witnesses for legal security.
Tips and Best Practices
- Keep the letter concise and clear.
- Discuss terms verbally before writing to avoid misunderstandings.
- Attach a simple repayment schedule if multiple installments.
- Maintain copies for both parties.
- Consider notarization for large loans to strengthen legal standing.
Comparison With Other Loan Documentation
- Unlike formal bank agreements, this letter is informal and personal.
- Compared to verbal agreements, it reduces the risk of disputes.
- Can include flexible terms suitable for friends, unlike strict institutional loans.
