Payment Agreement Template

A payment agreement template is what you use when you want to legally bind a creditor (lender) and a debtor (borrower). Also known as a payment contract or installment agreement, it outlines the terms and conditions of the loan between these parties. 

What is payment agreement template?

A simple payment agreement template is a document that outlines the terms and conditions of a financial transaction between two parties. 

It typically includes key information such as the names and contact information of the parties involved, a description of the goods or services being provided, the total cost, and the payment schedule. Additionally, it may include details such as late payment fees or interest, method of payment, and any contingencies or termination clauses. 

These simple payment agreement templates are often used in situations where a clear understanding of the financial obligations is required such as in a loan, rent or service agreements.

Our free payment agreement contract template can be used to outline important details such as loan payment schedules, loan amounts (also known as deficiencies), methods of payment, and personal details on behalf of the debtor and creditor. 

Then, you may esign and send it to the other party with Signeasy. Finally, save the legally binding payment agreement document as a PDF, and store it in your files for safekeeping. 

Why is a payment agreement important?

A payment agreement is crucial because it formalizes the loan arrangement, providing legal protection for both parties. 

It ensures that the lender has a clear record of the debt and the agreed-upon repayment terms, which can be used as evidence if there is a dispute or if the debtor defaults. 

For the debtor, the agreement provides clarity on the repayment obligations and helps in managing their financial responsibilities. 

Moreover, having a written agreement fosters trust between the parties, as it reflects a mutual understanding of the transaction.

When to use a payment agreement template

A payment agreement letter template is helpful when you want to acknowledge a loan transaction. 

Use this template in instances where:

1. You are offering a loan to someone.
2. You are the recipient of a loan.
3. You want to create a record of a payment schedule or table of amortization.
   

Whenever money is involved, it's best to keep clear and mutually agreed upon records of the transaction details. This gives both lender and borrower more confidence in the agreement. 

Note: Always have a payment agreement checked by a legal advisor. Each state has different rules that govern these types of agreements, so you’ll want to make sure that your contract conforms to the necessary legal requirements.

How to execute a loan agreement

People typically borrow funds from one of two sources: an individual (such as a friend or acquaintance) or a financial institution (say, a bank). 

Whatever the source of the loan, here are the steps that need to be followed when entering into a loan agreement:

Step 1: The borrower or debtor requests that a payment agreement contract be drawn up. If it's a loan from a business, the business will typically draft the agreement. In any other case, either party can create the document.

Step 2: For loans from banks or other financial institutions, you will have to submit supporting financial statements so that they have a view of your income and assets.

Step 3: The borrower and lender agree on a payment amount and schedule.

Step 4: The party that is in charge of drafting the agreement (again, this is typically the creditor) fills in all of the necessary information, then sends it to the debtor via an eSignature solution like Signeasy. For a printable and simple payment contract template, click here.

Step 5: The debtor signs the agreement and sends it back to the bank or the creditor.

Now that we know how the document is approved, let’s get more familiar with the various parts of a payment agreement template.

Elements of a good payment agreement template

A well-crafted payment agreement template should include the following key elements:

• Identification of parties: Clearly state the full legal names and contact information of the debtor and creditor.
• Loan details: Specify the loan amount, interest rate (if applicable), and the purpose of the loan.
• Payment schedule: Outline the payment plan, including the amount and due dates of each payment.
• Payment method: Detail how payments will be made, whether by cash, cheque, bank transfer, or another method.
• Late payment penalties: Include any late fees, interest charges, or other penalties that apply if payments are missed or delayed.
• Termination and breach clauses: Define the actions that will be taken if either party breaches the agreement, including the possibility of legal action.
• Signatures: Ensure that both parties sign the document to confirm their acceptance of the terms.

What to include in a payment agreement template

Even if you decide to use our free payment agreement template, it’s important to understand the many clauses within this contract. That way, you can decide which provisions to keep and which ones do not apply to you.

Covering the basics

As with most contracts, the first step is to introduce the parties involved. In the case of a payment agreement, it will be the debtor and creditor. Make sure you mention their legal names, addresses, and other identifying details. 

Then, make note of who owes who money, how much, and whether interest will be applied.

Acknowledge the deficiency

This clause is fairly straightforward. Explain that the creditor is owed the deficiency by the debtor under all circumstances. 

Clarify that the debtor has not been coerced or misled

In some situations, the debtor is unfamiliar or uncomfortable with the payment terms, and therefore coerced into signing the document. This clause confirms that the debtor did not feel forced into signing an agreement that they feel is unfair. 

Establishing a payment plan and method

In this section, you will address the fact that both parties agree to the payment plan. It also serves to confirm that the debtor agrees to pay according to the payment plan, by or before the due dates set forth in the agreement. To that end, a detailed payment plan should be attached to this agreement.

You should also make note of the preferred method of payment - cash, cheque, online transfer, etc.

Breach of contract

Lay out the course of action in the event that the borrower misses the due date for repayment of the loan. The creditor can ask for all of their money back in one payment if there is a 10-day default, or for additional interest calculated based on the delay (monthly, weekly, etc.). 

Common legal terms

In this section, we define the provisions that are included in most contracts, such as:

1. Indemnification: This clause relieves the Debtor from any penalties or defaults related to this loan, incurred prior to this agreement.
2. Assignment of rights: This gives the creditor the right to pass on the rights and duties pertaining to this agreement to a third party.
3. Modification of agreement: If either party wishes to change anything about the agreement, then they need to do so in writing, and both parties need to acknowledge and accept the modification.
4. Severability: If one part of the agreement is considered invalid, the rest of the contract will still hold water.
5. Applicable law: This provision mentions which state’s laws are applicable to the contract. 

Acknowledgement and signature

This section is proof that both the borrower and lender agree on the terms of this contract. You can use a mobile-based eSignature solution like Signeasy to sign an agreement yourself, then send it to the other party to sign.

Payment plan annex

This plan is the basis of the entire payment agreement contract. It outlines when the borrower will be paying, how much, and using which method.

The payment plan could include a due date that indicates when the deficiency should be paid in full.

Seal the deal with Signeasy 

Instead of printing, signing, scanning, and sending this template for signature as an email attachment, simply upload it to Signeasy. From there, you can enter all of the necessary information using your mobile device or computer, sign it electronically, and send a signing link to the other party.

Signeasy also allows you to track when a document is signed, instead of it getting lost in someone’s inbox. When it’s complete, store it in the cloud for your records.

For an added layer of legitimacy and consistency, Signeasy also lets you add your logo to documents you send out for signature. 

Want to sign your first few payment agreement templates for free? Try Signeasy free for 14 days!.

Payment agreement template FAQs

A payment agreement is a document that can be presented as evidence in case of any issues with the repayment of a loan. For more insight into how to craft a legally binding payment agreement, read on.

How do you write an agreement letter?

1. Open our simple payment agreement template in Signeasy
2. Insert the details of your transaction into the placeholders
3. Insert a eSignature on the dotted line
4. Click “Finish”
   

How do you write a letter of agreement between two parties?

Make sure you detail the specifics of the loan, from the name and address of the debtor and lender to the amount loaned, payment method, and terms of the agreement. Both parties will need to sign the agreement as a way to acknowledge its validity. Make sure to attach a detailed payment plan to the agreement.

How do I terminate a payment contract?

To terminate a payment contract, review the termination clause in your agreement, which typically outlines the conditions under which either party can end the contract. Both parties must mutually agree in writing to terminate the contract, or you may need to fulfill any outstanding obligations as specified in the contract.

Can I edit your payment terms template?

Yes, you can edit our payment terms template to suit your specific needs. Simply download the template, make the necessary changes to the terms, conditions, and payment schedule, and save your customized version. You can use Signeasy to edit documents. 

How to write a payment agreement in PDF?

To write a payment agreement in PDF, start by drafting the agreement using a word processor. Once finalized, save or export the document as a PDF. You can then use an eSignature solution like Signeasy to fill in the necessary details and sign the agreement electronically.